The Natural Rate Of Unemployment

The unemployment rates, as stated earlier, as of 2014 are dropping unexpectedly, it is stated in the article that the unemployment rate has decreased to 6.3 percent, a rate that is considered low when compared to previous years. There are two different rates of unemployment that could be affected in the economy, they are known as the rate of unemployment and the natural rate of unemployment. The rate of unemployment is the percentage of unemployed members that are in the labor force and the natural rate of unemployment is the percentage of labor force members employed that are not accredited to any resessions that could occur in the business cycle. The 6.3 percent of unemployment is an accumulation of these types of unemployment,

There are three different categories of unemployment called frictional, structural, and cyclical. Frictional unemployment is at the choice of the worker, it also includes new workers entering into the labor force for the first time, and workers reentering the labor force after an absence. This type of unemployment is included in the natural rate of unemployment and could have an immense impact on the unemployment rate. For example, a graduate student from high school or college or a mother reentering into the labor force are not apart of frictional unemployment until they begin actively searching for jobs. One category that falls under frictional unemployment is called seasonal unemployment, this is unemployment that is periodic unemployment due to certain times or seasons throughout the year, especially jobs like construction that are directly affected by the weather. This type of unemployment could mean a great deal to the unemployment rate due to the fact that there are so many people in America choosing seasonal jobs. Structural unemployment is caused by a difference between skills possessed by unemployed workers and skills required to fill certain job

Some advantages it could have is that the economy can become more stimulating and flourishing with more people in employed jobs. The rate for poverty would decrease and the national income would also rise. All of these factors can have immense impacts on the construction of a healthy economy, but just as there are positives to such a low unemployment rate there are also many negative impacts on the economy as well. Inflation is the most prominent conflict in an economy that is experiencing low unemployment rates and high prices. It is said that with the rate of unemployment now, since it is at a steady downfall, that it could be the cause of future inflation. Inflation is increases in the price of products or services sold in the United States markets. With such a gradually improving and stimulating economy along with a bettering labor market the risk of creating a powerful impact on the growth of inflation increases. In the article they provide an example of how hourly wages increased by 5 cents in May. It also addressed the labor departments announcement of how the rates of inflation was at 2.1 percent, which is higher than the underlying rate of inflation. There are two categories that could create inflation, they are demand-pull inflation and cost-push inflation. Demand-pull inflation is inflation that is the result of increases in total spending without any accompanied increases in