Leo Krause is laid off. How does he make ends meet until he finds another job? I

Question

Leo Krause is laid off. How does he make ends meet until he finds another job?

If we succeeded in setting up a computer-based national job bank with listings of virtually every job opening, what type of unemployment would this nearly eliminate? Explain how this would happen.

How were you and your family affected by the recession of 2007-2009?

On February 5, 2012, the BLS announced that employment fell by 20,000 in January, while the unemployment rate fell from 10.0 to 9.7. How do you explain that seeming contradiction?

Explanation / Answer

Until Leo Krause finds another job, he can meet his expenses by cutting his expenditures on luxury items such as unnecessary expenditures on movie tickets, visiting resturants etc. & thereby saving money. Moreover, he can also join some part time job which may not be necessarily upto his expectations. He can also use his past savings.

If we succeeded in setting up a computer-based national job bank with listings of virtually every job opening, then frictional unemployment will be reduced as this will increase the chances of matching the potential employees with the new employers in less time period.

The employment fell by 20,000, while the unemployment rate fell from 10.0 to 9.7. This contradiction can be explained by two phenomenon:

1) the absolute number of employed people is much larger as compared to the unemployed people. So, a fall of 20,000 in employed people might be very less as compared to a similar fall in unemployed people. Hence, the employment data and unemployment data have different population sizes and therefore may provide different results which are not directly comparable.

2) Unemployment rate = no. of unemployed /(no. of employed + no. of unemployed). Now, if the no. of employed people fell it results in increasing the unemployment rate but this isnot happening in this case. This might be due to a rise in the voluntary unemployment which results in declining the no. of unemployed people as voluntary unemployment is not taken into account while calculating the total labour force.

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