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What's Your Question?: Unemployment

Sunday, April 1, 2012

Q. Does the government provide assistance to unemployed people?

Yes. A federal-state unemployment compensation program was established as a part of the Social Security Act of 1935, providing partial wage replacement on a temporary basis to eligible, unemployed workers. The program is based upon federal law but is administered by individual states. Although state benefit formulas differ, there are some consistencies across states. For example, all recipients must (1) have earned a specific amount of wages, worked a certain length of time, or met a combination of wage and employment requirements; (2) be able and available for work; and (3) be unemployed through no fault of their own. These requirements limit payments to workers who are unemployed primarily as a result of economic causes.

Most states pay benefits weekly. Benefits paid vary by state based on a worker’s record of wages (within limits) and the benefit formula. In all states, unemployment benefits are subject to federal income tax. When unemployment is high, federal law requires states to extend the amount of time a worker can receive unemployment benefits.


Q. What are the different types of unemployment?

There are three types of unemployment:

Frictional unemployment is unemployment resulting from those transitioning from one job to another and those new to the job market, including recent graduates.

Structural unemployment is long-term joblessness caused by a mismatch in the skills held by those looking for work and the skills demanded by employers.

Cyclical unemployment is unemployment associated with recessions in the business cycle, when fewer workers are needed to provide the new (lower) level of goods and services demanded.


Q. In terms of employment opportunities, what does the future hold?

The Bureau of Labor Statistics (BLS) publishes long-term occupational employment projections every 2 years. For the period 2008-18, the expectation is that more new jobs will come from professional and service occupations and growth will be faster among occupations requiring postsecondary education. Strong employment growth is expected in healthcare and in technology, while employment is expected to decline in manufacturing and in farming, fishing, and forestry.



David Andolfatto and Marcela M. Williams. “Many Moving Parts: A Look Inside the U.S. Labor Market,” in Federal Reserve Bank of St. Louis Annual Report for the Year 2010. Federal Reserve Bank of St. Louis, April 2011;

Bureau of Labor Statistics. “Employment from the BLS Household and Payroll Surveys: Summary of Recent Trends.” January 6, 2012 version.