Why will our economy never experience 0 unemployment Provide

Why will our economy never experience 0% unemployment? Provide specific examples of unemployment that will always exist. Do you believe the process used to measure our nation’s unemployment yields accurate results? Be sure to support your answer with facts reflecting the process currently used by the Bureau of Labor Statistics.

Solution

No. Neither 0% unemployment is desirable nor it is possible. This is because even when there is full employment, workers voluntarily switch between jobs to get a better one and firms keep vacating positions to hire experienced candidates. Hence in the long run there will be certain level of unemployment called the natural rate of unemployment (composed of frictional and structural unemployment). The current measure of unemployment (called U-3) by BLS is not accurate because it ignores discourage workers and part time workers who are a part of labor force. If they are included, the overall unemployment rate would be high and would reflect the true picture of unemployment in the nation. Such a measure is U-6.

U-6 includes all total employed part time for economic reasons, discouraged workers who are now unwilling to look for a job after searching hard for it as a result of disappointment, all other workers who are marginally attached to labor force.