Employment and unemployment

Published on June 30, 2020 Reviewed on June 30, 2024   18 min
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Hi, my name is Mariano Torras. I'm a professor of Economics at Adelphi University in New York. We're going to be doing a lecture series on macroeconomics.
Employment is one of the fundamental problems in economics. As we have seen, every country has natural wealth in the form of productive factors like labor, capital, and other resources. The challenge is to put them to use. In other words, to reduce the amount of idleness in the economy. When economists talk about employment or unemployment, they are mostly referring to labor. But it is important to recognize that we do also sometimes speak about the proper or efficient employment of other productive factors. For example, the rate of capacity utilization refers to the extent to which, or to be specific, the average percentage of time that fixed capital like machines and the like are being employed. In this lecture, we will however, be focusing exclusively on labor unemployment.
Keeping the rate of unemployment relatively low is one of our principal goals. Too much unemployment has adverse spillover effects on the economy. People without jobs have less disposable income, resulting in less consumption, that if not addressed, leads to lower production and further layoffs, intensifying the problem and often leading to recession. The unemployment rate series shown for the United States is