Tuesday, May 31, 2011

Nice graph showing the difference between the Actual Unemployment Rate and the Natural Rate of Unemployment---Don't fall asleep! This IS important!!!

Here is a graph showing the Actual Unemployment Rate and the Natural Rate of Unemployment (NRU). They are the two upper lines, and the NRU is the dotted line.  The difference between the NRU and the Actual Unemployment Rate is the amount of Cyclical Unemployment present in the economy (the lowest line on the graph).  Cyclical unemployment occurs when there is a down turn in the business cycle and we experience a recession. Businesses are selling/producing fewer goods/services so they need fewer people to sell/produce goods/services.  This creates a downward spiral in the economy as the ring of layoffs/ business closures expands. 

The spread between the actual unemployment rate and the NRU is as large as it has been since the recession of 1982-83.  Too many people sitting idle and work skills eroding.  Gotta get this economy moving again.      
Source: Econbrower

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