Unemployment and Economic Growth
America’s economy, Let it ride (Article analysis)
The issue of rising unemployment rate has been in the headlines for a
long time in the recent past. The rates have been rising at a very
alarming speed. According to the article, this has not just been in
America but in the whole world including Europe and Africa. Graduates
have been wallowing in hopelessness as they are forced to take up odd
jobs in order to make ends meet. College freshmen are now registering
for courses that are more marketable so that they can get employment
easier (R.A. 1). This has caused an imbalance in the economies of many
countries including America’s.
There are some sectors of the economy that have been neglected since
there is no limited labour available. Employers have continued to resize
their workforce so as to cut on the cost of production. In the U.S for
instance, government has had several budget cuts with regard to the
allocations made for the labour market growth. There have also been
economic shutdowns in the recent past as well as weak growth registered
in the emerging world (R.A. 3). The financial markets have experienced a
lot of shake-ups due to delayed repayments of short-term loans.
Despite the many disappointments, there is a glimpse of hope at last.
According to the article, the American economy is surprisingly picking
up at a steady rate. There are positive growths in many sectors of the
economy. Employers are beginning to open their doors to job seekers to
join in the workforce. There has been a significant drop in the level of
unemployment in America. Something that is surprising is that the drop
has been registered over a short period. New data from the Bureau of
Labour Statistics indicate that in November alone, 203,000 new jobs have
been added to the American economy. This is apart from the average
195,000 net new job hires per month in the past year. Till November
2013, being 12 months in counting, the private firms in the U.S have
added 2.3 million workers in total. Inasmuch as this is not the best
performance for the recovery period, it is far above the average. It is
actually a tremendous step in the recovery of the economy. There is a
possibility of this number doubling by the end of December this year.
According to the article, the job figures are the most recent
encouraging news in the economy. In the third quarter of the year,
output grew by 3.6 percent per annum. The article stipulates that
unemployment has been announced to have dropped by 300,000 and is at a
healthy level. After the announcement of the good news, there are some
expectations for the various authorities involved (Layard, et al 44).
For example, the Federal Reserve is expected to trim its asset-purchase
programme for December. This will go a long way in helping to create
more employment opportunities. In a recent job report, the unemployment
rate had dropped to 7%. This was the threshold for “tapering.”
Despite the decline in the unemployment rate, the ratio of employed
workers in the population has hardly moved. Moreover, the labour-force
participation rate has also fallen drastically. The interpretation of
this could be that people who have been jobless for long are no longer
preferred by employers.
However, achieving the lowest minimum level of unemployment by December
may be difficult. According to the article, there are still up to 11
million officially unemployed. This figure is too big and the
opportunities created have already been taken up. Additionally, there
have been a lot of destabilizations in the economy as a whole. These two
constraints make it difficult to have a taper by the end of December. It
has been over four years since the beginning of the recession process
yet the employment has not reached the pre-recession peak. It will be
impossible to have these facts change within the short period.
While the recent job growth is surprising and encouraging many, it may
not be the fastest recovery processes. There are certain issues that
have made the process of job creation not to be as fast as expected. The
Fed and other regulatory bodies are working hard to ensure the process
is robust. The huge number of workers still unemployed is a motivation
to see the process speed up. Growth in the rate of employment has been
on the recovery even in the rest of the world (R.A. 2). For instance,
Europe has registered positive change in the labour market despite the
many crises in the economy.
Despite the celebrations of having unemployed get into the workforce,
those already in the employment are not happy. The average wage growth
continues to be at2%, which is below the expected rate. The core
inflation for America is stagnating at 1%, half of the expected rate by
Fed. The Fed has indicated that with the steady growth in the employment
rate, nothing much should be expected on lowering inflation (Layard, et
al 65). However, the good news is that there are jobs being created and
therefore economic growth is anticipated.
R.A. America’s Economy Let it Ride. The Economist, 6 December, 2013
Web. 9 December, 2013. < HYPERLINK
Layard, Peter, Nickell, Stephen, & Jackman, Richard. Unemployment:
Macroeconomic Performance and the Labour Market. Oxford: Oxford
University Press, 2005. Print.
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Unemployment and Economic Growth