Causes and Consequences of UnemploymentBy Group 2

Seasonal Unemployment

Unemployment due to lack of demand during certain times of the year.

Agriculture and construction activity tends to be seasonal.

Example #1during summer – number of jobs in tourist industry increase.

Example #2during winter – number of jobs in ski and snowboarding resorts increase.

Casual Unemployment

Casual Unemployment is also known as Frictional Unemployment.

Occurs when a worker leaves a job and spend time looking for a better one.

Usually short term periods of unemployment between jobs.

ExampleRecent college graduate who suddenly becomes available in the job market, but has yet to find his first job.

Structural ChangesRefers to the change in demand caused by a change in people’s tastes.

Structural Unemployment

Occurs from the lack in demand for the goods and services a firm produces.

Many workers are made unemployed.

Workers become occupationally immobile.

ExampleThe change from labour-intensive production to high-tech capital-intensive production.

Falling Aggregate Demand

Cyclical Unemployment: Too little demand for goods and services in in the economy during a recession.

Fall in demand during a slump Reduces spending Stocks of unsold products accumulate Firms cut their production Increase in unemployment.

Small change in total expenditure can cause much larger changes in income, output and unemployment.

Imagine there is a car manufacturer ACar manufacturer A experiences a fall in demand, thus they now produce less cars.

Jobs are lost.Because car manufacturer A produces less, they can cut costs by making workers redundant.

ElectricityAll the factories use electricity, as “A” now produce less, they do not need as much electricity. • What will happen to

the workers at power stations?

Coal and OilPower stations run on coal and oil.• What will happen to the demand of coal and oil?• What will happen to the coal-miners and oil-drillers?

Goods and ServicesAll the people who have lost their jobs now have less money to spend.• What will happen to the level of

demand for all other goods?

Hence the term:

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