Editing Macroeconomics (section)

===Unemployment===
{{Main|Unemployment}}

[[File:Okuns law differences 1948 to mid 2011.png|thumb|left|A chart using US data showing the relationship between economic growth and unemployment expressed by [[Okun's law]]. The relationship demonstrates cyclical unemployment. High short-run GDP growth leads to a lower unemployment rate.]]

The amount of [[unemployment]] in an economy is measured by the unemployment rate, i.e. the percentage of persons in the [[labor force]] who do not have a job, but who are actively looking for one. People who are retired, pursuing education, or [[discouraged worker|discouraged from seeking work]] by a lack of job prospects are not part of the labor force and consequently not counted as unemployed, either.<ref name=Blanchard/>{{rp|156}}

Unemployment has a short-run cyclical component which depends on the business cycle, and a more permanent structural component, which can be loosely thought of as the average unemployment rate in an economy over extended periods,<ref name=Romer>Romer (2019).</ref> and which is often termed the [[Natural rate of unemployment|natural]]<ref name=Romer/> or structural<ref name=Sørensen>Sørensen and Whitta-Jacobsen (2022).</ref><ref name=Blanchard/>{{rp|167}} rate of unemployment.

[[Unemployment#Cyclical unemployment|Cyclical unemployment]] occurs when growth stagnates. [[Okun's law]] represents the empirical relationship between unemployment and short-run GDP growth.<ref>Dwivedi, 445–46.</ref> The original version of Okun's law states that a 3% increase in output would lead to a 1% decrease in unemployment.<ref>{{Cite web |title=Neely, Christopher J. "Okun's Law: Output and Unemployment. ''Economic Synopses''. Number 4. 2010. |url=http://research.stlouisfed.org/publications/es/10/ES1004.pdf.}}</ref>

The structural or natural rate of unemployment is the level of unemployment that will occur in a medium-run equilibrium, i.e. a situation with a cyclical unemployment rate of zero. There may be several reasons why there is some positive unemployment level even in a cyclically neutral situation, which all have their foundation in some kind of [[market failure]]:<ref name=Romer/>

* [[Search unemployment]] (also called frictional unemployment) occurs when workers and firms are heterogeneous and there is [[imperfect information]], generally causing a time-consuming [[Search and matching theory (economics)|search and matching process]] when filling a job vacancy in a firm, during which the prospective worker will often be unemployed.<ref name=Romer/><ref>Dwivedi, 443.</ref> Sectoral shifts and other reasons for a changed demand from firms for workers with particular skills and characteristics, which occur continually in a changing economy, may also cause more search unemployment because of increased mismatch.<ref name=Mankiw>Mankiw (2022).</ref><ref>{{Cite web |title=Freeman (2008) |url=http://www.dictionaryofeconomics.com/article?id=pde2008_S000311.}}</ref><ref>Dwivedi, 444–45.</ref>
* [[Efficiency wage]] models are labor market models in which firms choose not to lower wages to the level where supply equals demand because the lower wages would lower employees' efficiency levels<ref name=Mankiw/>
* [[Trade unions]], which are important actors in the labor market in some countries, may exercise [[market power]] in order to keep wages over the market-clearing level for the benefice of their members even at the cost of some unemployment
* Legal [[minimum wage]]s may prevent the wage from falling to a market-clearing level, causing unemployment among low-skilled (and low-paid) workers.<ref name=Mankiw/><ref>{{Cite web|last=Pettinger|first=Tejvan|title=Involuntary unemployment|url=https://www.economicshelp.org/blog/glossary/involuntary-unemployment/|access-date=2020-09-21|website=Economics Help|language=en-GB}}</ref> In the case of employers having some [[monopsony power]], however, employment effects may have the opposite sign.<ref>{{Cite journal |last1=Dickens |first1=Richard |last2=Machin |first2=Stephen |last3=Manning |first3=Alan |date=January 1999 |title=The Effects of Minimum Wages on Employment: Theory and Evidence from Britain |url=https://www.journals.uchicago.edu/doi/10.1086/209911 |journal=Journal of Labor Economics |language=en |volume=17 |issue=1 |pages=1–22 |doi=10.1086/209911 |s2cid=7012497 |issn=0734-306X}}</ref>