Types of Unemployment, Essay Example

A1. The elimination of 120,000 jobs by the postal office should be considered a structural unemployment. It is not frictional because the lay-offs were not voluntary and employees didn’t leave in search of better opportunities and it is not cyclical either because the changes that have forced these layoffs are relatively permanent in nature. Thus, this is structural unemployment as the article mentions that the decline in demand for postal services are due to changes that have occurred in consumer habits and economy such as substitution of mail with email and reduction in through-the-mail advertising. It is clear that the Postal Office business operations have also been negatively affected by the internet and internet is here to stay. Thus, the decline in Postal Office financial performance is not as much due to recession as it is due to permanent changes in the society.

A2. The unemployment rate in the construction industry was almost 50 percent greater than the average unemployment rate. Even though the housing construction industry entered a long-lived period of decline, this unemployment should be characterized as cyclical unemployment. This is because we understand that one of the reasons behind the recent financial crisis was housing bust which has left us with huge inventory of unsold houses. In addition, housing defaults have only worsen the situation. Recession has also forced many would-be housing buyers to postpone or delay their plans. Unless the market is able to sell existing inventory, the construction sector will hesitate to build new houses which explains the high unemployment rate in the construction industry. But once the economy has recovered and buyers again enter the market to purchase houses, the existing inventory will fall and construction industry will resume building activities. This should help lower unemployment rate in the construction sector.