Measuring the Unemployment Rate in USA

Introduction

A country is said to have unemployment if there are people of working age who are willing and able to work under the prevailing economic conditions but they cannot find opportunities. The level of unemployment of a country varies depending on the prevailing economic conditions. For instance, during the 2008-2010 global economic crisis, many countries suffered high rate of unemployment.

This was because most companies closed down and others suffered huge losses. The general level of production declined and most companies could not hire more employees. In the United States, many mortgage firms collapsed and other sectors like agricultural sector suffered huge losses. Labor force is the total of those people seeking jobs and those that are already employed. The unemployment level is the number of people in the labor force that are not employed (global economic research 1). The self employed people mostly not looking for jobs are considered employed.

In this paper, we shall discuss the unemployment rate in the context of the United States. We shall look at the recent changes in the unemployment rate, the causes, effects on the country and the measures that should be taken to lower the unemployment rate.

The unemployment rate in the United States

The United State rate of unemployment has been going up from 2007 when the economic crisis started to the end of 2009. According to global economic research (1), the unemployment data for March 2010 indicates that the US unemployment rate from January to March 2010 was 9.7% which stagnated after a series of increase since 2007. This data only includes the part of the labor force that is not employed and is looking for jobs. The non-labor force like those serving in the military are not included. The table below shows monthly averages for US unemployment rate from January 2007 to March 2010.

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 9.70 9.70 9.70
2009 7.70 8.20 8.60 8.90 9.40 9.50 9.40 9.70 9.80 10.10 10.00 10.00
2008 5.00 4.80 5.10 5.00 5.40 5.50 5.80 6.10 6.20 6.60 6.90 7.40
2007 4.60 4.50 4.40 4.50 4.40 4.60 4.60 4.60 4.70 4.70 4.70 5.00

The rate of unemployment decreased in 2010 as the US economy continued to recover from the economic crisis. The rate is expected to decrease in the future as the economy continues to recover because the employment sector is expected to recruit more workers.

The unemployment rate in the United States

The graphs above show the average monthly changes for the US unemployment rate for 2007, 2008, 2009 and the first three months of 2010. The graphs represent the data in the table above as was recorded by the global economic research.

The trend shows that the rate of unemployment has been increasing from January 2007 to December 2009 but decreased in January 2010. There are several factors that contribute to the increase in the rate of unemployment of a country. First there is high inflow of people who are unemployed or are looking for jobs opportunities. There is also immigration of people who are unemployed and are looking for new jobs causing the number of the unemployed to increase (global economic research 1). These are people who have lost their previous employment and are now job seekers. There are also people who may have stopped looking for jobs, may be due to frustrations after looking for jobs for a long time to no avail.

Causes of US unemployment rate increase

The rate of unemployment increased following the global financial crisis of 2007 -2010. The main cause was the collapse of industries and general decline in the US economic performance. Many companies made losses and others collapsed and could not hire more employees. The demand for employment exceeded the supply for opportunities leaving many people jobless though willing and able to work.

According to global economic research (1), the rate of unemployment also increases due to people taking long before they get settled in their new jobs. This is known as frictional unemployment where people mostly lack information about the available jobs in the economy. It takes them time before they find these jobs and during that period, they are recorded as unemployed.

The rate of unemployment also increases where job seekers do not have the skills needed in the job market or those specified in the available opportunities. There are other cases where the workers take some more time to retrain so that they can match the new skills. They are recorded as employed during the time of retraining and before they start their new jobs. The change of technology may require the workers to retrain for them to retain their positions. This form of unemployment is referred to as structural unemployment and is mostly caused by the change of technology.

The other cause of unemployment in US following the recession is what is called demand deficient unemployment. Keynesian economics, have it that the level of aggregate expenditure of a country usually decline in an unfavorable economic conditions. This decreases demand for labor thus causing unemployment rate to increase.

Effects of high unemployment rate on the country (US)

Due to high supply of labor and low demand in the economy, the wages will tend to decline. The living standard of the employed goes down due to low income. There is also dissatisfaction of workers which may make them less productive in their jobs. This will increase the cases of fraud in the companies. There will be high dependency ratio because the unemployed people will depend on the few employed for food, clothing and other needs. The poverty level will increase in the country with people having no means of getting basic needs. Government expenditure will increase as the government funds food programs. To get these funds, the government will increase taxes. With increased poverty level, crimes will increase in the country. People will also engage in illegal businesses.

Means of reducing the unemployment rate

There should be easier ways of accessing job opportunities by the job seekers. For instance, the use of internet in advertising job opportunities would make it easier for the job seekers to find jobs quickly. Education institution on the other hand should try to match the skills taught with those needed in the job market. Employers should train their employees on the new developments in the job markets. This will equip them with the right skills. The government should also revive the collapsed industries in order to increase employment.

Conclusion

The rate of unemployment can be reduced if the above measures are implemented. The US should try to solve the causes of unemployment. People should try self employment and they will not be counted as unemployed.

Works cited

Global economic research. Trading economics: United States Unemployment rate. New York: Bloomberg, 2010. Web.