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looking after children, taking a voluntary break before a new job – are not interested
in having a job, either. It also includes those who do want a job but have quit looking,
often due to being discouraged by their inability to find suitable employment.
Economists refer to this third group of those who are not working and not looking for
work as out of the labor force or not in the labor force.

Employed: currently working for pay.
Unemployed: out of work and actively looking for a job.
Out of the labor force: out of paid work and not actively looking for a job.
Labor force: the number of employed plus the unemployed.

The unemployment rate is not the percentage of the total adult population
without jobs, but rather the percentage of adults who are in the labor force but who do
not have jobs:
Unemployment rate = Unemployed persons / Total labor force × 100 %

The unemployment caused by the time it takes workers to search for a job is
called frictional unemployment.
The unemployment resulting from wage rigidity and job rationing is called
structural unemployment.
The variation in unemployment caused by the economy moving from
expansion to recession or from recession to expansion (i.e. the business cycle) is
known as cyclical unemployment. Unemployment tends to rise in recessions and to
decline during expansions.

Economists have a term to describe the remaining level of unemployment that
occurs even when the economy is healthy: it is called the natural rate of
unemployment. Natural rate of unemployment – the average rate of unemployment
around which the economy fluctuates. The natural rate is the rate of unemployment
toward which the economy gravitates in the long run, given all the labor-market
imperfections that impede workers from instantly finding jobs.

In economics the price paid to labor for its contribution to the process of
production is called wages. Economists have differentiated between nominal wages
and real wages.
The total amount of money received by the laborer in the process of production
is called nominal wages. Nominal wages do not depend on costs in the economy and
require no calculation.
Real wages are the amount of income a person earns relative to some past date
while correcting for the impact of inflation. Real wages provide insight into the actual
purchasing power a worker has. Real wages only increase if nominal wages increase
faster than the inflation rate. If prices increase faster than nominal wages, real wages
will fall. The real wage is defined as the nominal wage divided by the general price
level.

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