Unemployment in US

Unemployment in US

As the redundancy rate in American reduces drastically, economists are in consensus that the United States is close to attaining full employment. Harvey defines the concept as the level of employment beyond which any further increase in demand in the economy will not create more jobs (8). During a period of full work, all skilled and able workers have jobs, and their wages and working hours correspond to their productivity. Crucially, the only people who cannot find jobs when the economy in full employment are ones who do have the skills or ability to work and the frictionally unemployed. One method of determining whether the economy has achieved full employment is by comparing the actual and natural rates of unemployment. In the last quarter of 2018, the average actual unemployment rate was 3.775 (United States Department of Labor). Conversely, the natural rate of unemployment in the same period was 4.47481(Federal Reserve Bank of St. Louis). In this regard, the actual rate of unemployment is less than the natural rate, indicating that the American economy is above full employment. If unemployment is to decrease significantly, inflation increase as firms compete to recruit qualified workers, causing the wages to rise too fast. This argument was confirmed by Crook, who argued that full employment is achieved when the rate of joblessness falls to the point that it would not trigger inflation. Thus, the United States is above full employment, and the government should take measures to prevent the increase from rising.

Most mainstream analysts view full work as an empirical target that is accomplishable if a given amount of available workforce is available. For example, a considerable proportion of advancing analysts refer to “economic growth” or near employment as four percent of jobs (Harvey). Findings have shown that such an assertion does not correlate to either the monetarist paradigm or the significance granted to the populace and the statute of employment. Still, there is some ambiguity as to the disadvantage of those economic experts who have used the above claims. Whether or not they acknowledge it, the contentious overhaul of the notion of employment has exceptionally negative implications. It marginalizes failed unemployed people, obscures national idea of the real circumstances of the employment market, prevents the growth of efficient full-time reforms, and discredits the achievement of gradual initiatives.

Three major factors have been attributed to the high unemployment rate from 2007-2012. To begin with, the 2008 recession drastically transformed the economy, causing a mismatch between the skills requirements and job openings (Daly et al. 3). This mismatch describes either a discrepancy between labor-force or fundamental skills. For instance, there was an increased number of steelworkers and a high demand for information technology skills (Adams et al. l843). Moreover, a frictional mismatch between job seekers and employees increased, as the supply of labor might have been adequate in the market, but employers experienced hiring challenges because of the nature of contracts, poor working conditions, and job seekers’ reputation. Another form of frictional mismatch was geographical immobility. Additionally, extended unemployment benefits reduced the need for job seekers to look for work. As Marinescu cites, unemployment benefits extend joblessness period since that generous receiving assistance take longer to look for work. Job seekers on unemployment benefits often wait for higher wages, and employers were not willing to increase salaries, causing high redundancy rates. Notably, a 10% extension of benefits duration directly causes a 1% decline in job applications (Marinescu). Nonetheless, economists supported an increase in benefits duration during the recession, arguing that the effect on the unemployment rate was insignificant.

Besides, increased economic uncertainty during and after the 2008 financial crisis was among the major causes of high unemployment in the United States. Between 2007 and 2012, companies widely employed the wait-and-see strategy because of the widespread macroeconomic uncertainty; thus, companies drastically reduced investments and new hires (Choi and Loungani 6). Uncertainty also suppresses economic activity and reduces demand; thus, increasing the rate of unemployment.

Natural Rate of Unemployment Pattern

Downturns in the financial system generally influence the state’s business cycles and mainly weaken demographics in the financial sector. They undergo an assessment by examining metrics in market cycles such as joblessness, available jobs, and so on. In the post-World War II era, the U.S. saw a rise in unemployment. This rise links to the crisis of 2007–2009. The jobless rate has increased by 5.6 percent, from 4.4 percent at the end of 2006 and in early 2007 to 10 percent in October 2009; these numbers surpass the rise during the middle of 1979 and late 1982, which did by 5.2 percent (Dally et al. 3). Nevertheless, the jobless rate reduced by nearly 1.7 percent to 8.3 percent. The weak economic growth, a frequent occurrence after recessions, represents this continued poverty on the job markets in general (Dally et al. 3). The speed of sluggish employment has hardly matched the subsequent rise of the population. So, there are not quite enough jobs created, which adversely affect unemployment or significantly reduces the quest time frame.

Therefore, in comparison with other economic cycle indices, for example, workforce vacancy rates, the jobless rate continued to rise. This situation raises the question of whether the U.S. recession now has a significant systemic dimension that is not only solely transient, but it will continue even after the U.S. economy picks up entirely from the decline. This problem indicates, in return, that the complete or “normal” rate of unemployment now exceeds the downturn (Dally et al. 4). A check and compare method have accustomed to determine how much the regular jobless rate has improved. This method defines two trends: the Beveridge gradient and the job creation curve, representing the availability of jobs and the market. Under that sense, over the crisis and recession phase, the real jobless rate has risen. The alternative calculation suggests that the real jobless rate rose by about one third, either before or shortly following the contraction. The NRU chart shows an increase, clearly, from 2007 to 2012.

The discussion on full employment, and the natural rate of unemployment, reveal several dynamics. The high rates of unemployment are likely to affect the economy negatively. The change is attributable to the rise of dependency between the working and the non-working categories. Therefore, more inventions deserve establishment to create more opportunities for a permanent contract. The relevant stakeholders should also work on educating people on self -independence, and the utilization of their skills to make money. One doesn’t have to rely on the white-collar jobs when he/she has the potential of establishing an income-generating project. The utilization of the various skills will influence the unemployment rate positively because of the