Unemployment Trends: Study with Video Lessons, Practice Problems & Examples

Analyzing unemployment trends reveals that African Americans face higher unemployment rates than whites, despite similar labor force participation rates, likely due to institutionalized racism. Teenagers also experience higher unemployment due to lower participation rates and hiring skepticism. Over time, women's labor force participation has increased while men's has decreased, influenced by longer education and retirement. Unemployment rises during recessions, linked to cyclical unemployment as demand for goods and services declines, leading to layoffs. Understanding these dynamics is crucial for grasping labor market fluctuations and economic cycles.

Unemployment Trends:Age and Race

So some interesting trends emerge when you analyze the unemployment rate in the US. Let's check out some of those common trends. So the first thing we're going to do is analyze by race and by age here. Okay. So the first one we have is, adults and teenagers, their unemployment rate here on the left column and their labor force participation rate on the right column. Column. So it separates between white and black for both categories and we can make two conclusions here. The first one we see is that African Americans tend to have a higher unemployment rate, even though they have similar labor force participation rates. Now why is that? Look, let's focus here on the adults. Notice that they have very similar, labor force participation And remember, labor force participation, this is, labor force divided by adult population, where the unemployment rate is unemployed divided by labor force. Okay. So unemployed is the people who are looking for work but can't find jobs, right? So they're part of the labor force but they can't find jobs where the labor force participation rate is for how many of them are actually included in the labor force. So why are African Americans tending to have a higher unemployment rate? Well, the most likely explanation is that there's still lingering institutionalized racism throughout the job market. So a lot of a lot of times people will actually hire whites instead of blacks and there's even been studies done where people will send in fake resumes with a more black sounding name and have fewer callbacks just because of the name on the resume. So it's likely that a lot of times these unemployment rates are because people tend to hire whites more often than blacks. Okay? And that's what we see happening here, right? Where we have the white male and female having a lower unemployment rate than the black male and female right there. Okay? Is that teenagers, how does the teenage unemployment rate look compared to adults? Let me erase those there. So you would probably logically expect that teenagers tend to have higher unemployment as well, right? Teenagers have higher unemployment rates than adults as well and that's for multiple reasons. First, they have low labor participation rates, right? Because not all teenagers are looking for work where more likely that an adult is going to be looking for work than a teenager, teenagers are still in school, so they don't always have to be looking for a job. So there's less labor force participation from teenagers, but again teenagers have difficulty finding jobs. A lot of places are skeptical about hiring teenagers, for multiple reasons, right? So teenagers are going to have difficulty securing jobs compared to their adult counterparts. So those are two conclusions we can come to from this data here is that African Americans tend to have higher unemployment rates and teenagers also tend to have higher unemployment rates. Cool? Let's pause here and let's move on to the next graph.

Unemployment Trends:Gender

Alright. So this next graph is really interesting as well. It shows the labor force participation of men and women over time. So what we're going to see, what we can definitely tell from the graph is that women have been joining the labor force. Women have joined the labor force over time while men have left the labor force over time. There are fewer men in the labor force comparatively, since the 1950s here and more women in the labor force since the 1950s. So, why is this convergence happening here between the two? Well, it's generally easy to explain the increase of women in the workforce, right? Because in the 1950s, a lot of women were homemakers; there were fewer women in the workforce in general, but that changed over time. Over time, more women have been going to college, more women have been participating in the labor force especially since the 1970s. You can see this steeper increase in the women in the labor force there. But what about men? Why are men leaving the labor force? Well, partially it is because men are staying in school longer, so the longer you spend in school, you're not included in the labor force even though you're in the adult population getting master's degrees, doctorates, spending a lot more time in school, so staying in school longer keeps you out of the labor force. People are having longer retirements, longer retirements. So if you're living longer, right? If you're living longer, you're going to be an adult for a longer time and not included in the part in the labor force although you are an adult and you're just retired. And now, sometimes men are taking over the homemaker role. So more women are employed, there are men that are the homemakers, right? Men can be the homemakers now as well where back in the 1950s that was a lot less likely. Okay? So that kind of explains why some of these trends have been changing over time and it continues to be that way. We see that women are more and more likely to be going to college and men in the other direction are less likely to go to college over time as well. Cool? So let's go ahead and take a pause here and we'll look at one more graph on the next page.

Unemployment Trends:Business Cycle

So we've discussed this before, but it's nice to see it on a graph. What we have here is the unemployment rate over time. And what's marked in purple, these purple sections, just like we've seen on other graphs, are recessions. So what do we notice happening during all of those purple sections on the graph, those recessions? We see the unemployment rate increasing significantly, right? We see it going up during all of the recessions. All of them show this increase in unemployment. And why is that? Remember when we studied the 3 types of unemployment: cyclical, structural, and frictional unemployment? Which one is this related to? Well, this is the business cycle details, but just logically, when you think about a recession, what's happening? We're having lower demand for goods and services. People aren't spending money as much anymore. There's a lack of demand, a lack of production, and it leads to increased unemployment. Companies don't need to be producing their products as much because nobody's buying them, so it leads to layoffs and this cyclical unemployment. The big takeaway from this class, one of the big takeaways, is always going to be that during recessions, unemployment increases. That's always going to be true here and that's exactly what we see going on in all of these situations, okay? Cyclical unemployment increases during these recessions. Let's go ahead and take a pause and move on to the next video.

Here’s what students ask on this topic:

Why do African Americans have higher unemployment rates than whites despite similar labor force participation rates?

African Americans tend to have higher unemployment rates than whites, even though their labor force participation rates are similar. This disparity is often attributed to lingering institutionalized racism in the job market. Studies have shown that resumes with names that sound African American receive fewer callbacks compared to those with white-sounding names. This bias in hiring practices contributes to the higher unemployment rates among African Americans. Additionally, systemic issues such as unequal access to quality education and professional networks further exacerbate this problem, making it harder for African Americans to secure employment.

What factors contribute to teenagers having higher unemployment rates compared to adults?

Teenagers generally have higher unemployment rates compared to adults for several reasons. Firstly, teenagers have lower labor force participation rates because many are still in school and not actively seeking employment. Secondly, employers may be hesitant to hire teenagers due to their lack of experience and perceived reliability. Additionally, teenagers often seek part-time or seasonal jobs, which are more competitive and less stable. These factors combined make it more challenging for teenagers to find and secure employment compared to their adult counterparts.

How has the labor force participation of men and women changed over time?

Over time, the labor force participation of men and women has shown significant changes. Since the 1950s, women's participation in the labor force has increased substantially, driven by higher educational attainment and societal shifts that encourage women to pursue careers. Conversely, men's labor force participation has declined, partly because more men are staying in school longer and retiring earlier. Additionally, some men are now taking on homemaker roles, a trend that was less common in the past. These changes reflect broader social and economic transformations over the decades.

Why does unemployment increase during recessions?

Unemployment increases during recessions primarily due to cyclical unemployment, which is linked to the business cycle. During a recession, there is a significant decline in demand for goods and services. As a result, companies reduce production and lay off workers, leading to higher unemployment rates. This lack of demand and subsequent reduction in production are key characteristics of cyclical unemployment. Understanding this relationship helps explain why unemployment spikes during economic downturns and highlights the importance of economic policies aimed at stabilizing demand during such periods.

What are the main types of unemployment, and how do they differ?

The main types of unemployment are cyclical, structural, and frictional unemployment. Cyclical unemployment is related to the business cycle and occurs during economic downturns when demand for goods and services decreases. Structural unemployment arises from mismatches between workers' skills and job requirements, often due to technological advancements or shifts in the economy. Frictional unemployment is temporary and occurs when individuals are transitioning between jobs or entering the labor force for the first time. Each type of unemployment has different causes and implications for the labor market and economic policy.