Unemployment A Tremendous Phenomenon In Economics

Unemployment is unavoidable in any economy. However, it is not necessarily harmful. In a healthy economy, a certain degree of unemployment indicated as a percentage reflects the fact that there constantly are job seekers and employers voluntarily running after better opportunities for their own good. In economics, unemployment refers to the condition of unwanted job losses, or willing workers without jobs. It’s as simple as that, only one thing we should pay attention that the willingness of the unemployed worker to be employed is the key to the idea. Therefore, not everyone who’s out of work is seen as unemployed. In other words unemployment is the people that don’t have a job, but are looking for one. To be able to understand how unemployment relates to our economy we first need to understand the two branches of study within economics: microeconomics and macroeconomics.

We all know that the United States has been facing a recession for about three years now. Economists are paying very close attention to the unemployment rate, if it has been going up or down, has it been stable, if so for how long; But what exactly it is unemployment? How unemployment harms our daily lives and the economy? For people who do not quite understand unemployment can be very confusing and can have a misunderstood of what exactly unemployment is. To be able to understand how unemployment relates to our economy we first need to understand the two branches of study within economics: microeconomics and macroeconomics.

Microeconomics is the branch of economics that analyzes firms, individuals and households’ decision-making processes, behaviors and interactions that affect the allocation of limited resources of the society, while macroeconomics studies the overall aspects and workings of a national economy, such as output, income, unemployment, inflation or price levels, and the interrelationship among diverse economic sectors, developing, testing and applying models and theories about how the economy as a whole works, which are further used to predict consequences of certain events and direct the use of economic policies. Economics may appear to be the study of complicated tables and charts, statistics and numbers, but, more specifically, it is the study of what constitutes rational human behavior to fulfill needs and wants.

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Unemployment is unavoidable in any economy. However, it is not necessarily harmful. In a healthy economy, a certain degree of unemployment indicated as a percentage reflects the fact that there constantly are job seekers and employers voluntarily running after better opportunities for their own good. In economics, unemployment refers to the condition of unwanted job losses, or willing workers without jobs. It’s as simple as that, only one thing we should pay attention that the willingness of the unemployed worker to be employed is the key to the idea. Therefore, not everyone who’s out of work is seen as unemployed. In other words unemployment is the people that don’t have a job, but are looking for one.

Back in 1878, Carroll D. Wright tried to count the number of people that were unemployed. Mr. Wright was the first person to create a survey of unemployment. Over the time unemployment has increased. One reason unemployment has increased is because the United States population has being increasing.

There is a formula that economist use to find the unemployment rate. First you have to find the Labor force. The labor force does not include retirees, full time students, people in the arm forces, institutionalized people, or teenagers under 16. The labor force is made up of people working and unemployed. Then you would divide the labor force by the unemployed. The number of unemployed includes individuals that don’t have a job but are seeking one, any full time students, retirees, and unemployed people that have given up looking for a job.

The unemployment rate now for the United States is 9.8 percent but it is different for each state. In Texas the unemployment rate is 8.1 percent, but for Michigan it is 12.8 percent. The unemployment rate is different for whites, blacks, and Hispanics. For example the unemployment rate for single, over 25 years, white, males is 12 percent. For blacks it is 20.8 percent and for Hispanics it is 13.8 percent. (These percentages are based of 2009.) One reason why they are different is because of discrimination and their skills.

Unemployment will always exist. Even in the healthiest economy there is some kind of unemployment. That is why they establish a natural rate of unemployment. The natural rate of unemployment was developed by two American economists in the 1960’s. Milton Friedman and Edmund Phelps also received a noble prize in economics. One reason why we have to maintain some unemployed is so we don’t have high inflation. The natural rate of unemployment is 5 percent in the United States right now.

There will always be some level of unemployment because of frictional, structural, cyclical, surplus, and seasonal unemployment. Frictional unemployment occurs when skilled workers are looking or waiting to take a job that accommodates their skills in the future. A good example of frictional unemployment is when people look for a higher-paying, higher-productive job and abandoned their current job.

Structural unemployment happens when unemployed workers don’t qualify the demand for certain skills on the job. Changes in consumer demand and technology affects structural unemployment and the demand for labor, both occupationally and geographically. Occupationally because of the demand of certain skills, such as working on farms and geographically because demand for labor change from one place to another. Structural unemployment is more likely to be long-term and more serious.

Cyclical unemployment can be described as unemployment that is caused by a decline in total spending; when business cycles are at their pick cyclical unemployment is low because economic output is maximized and when they are low unemployment cycle is higher, Cyclical unemployment can be described as the result of businesses not having enough demand for labor to employ people who are looking for work; economists suggest that cyclical unemployment could be a very serious problem. Seasonal unemployment is unemployment expected at a given time of the year. For example, a fisherman can only fish during the fishing season, after the fishing season is over and if he doesn’t have another type of job after the fishing season he would be count as unemployed, construction and forestry are affected by the weather and seasons too.

Surplus unemployment is defined by the U.S Department of Labor when a “civil jurisdiction” has a surplus labor, “When its average unemployment rate is at least 20 percent above the average unemployment rate for all states (including the District of Columbia and Puerto Rico) during the previous two calendar years.”

Conclusion

In this essay, we have discussed the constant matter of unemployment and the American people. Unemployment is a state of being for one who does not have a job but is actively looking for an occupation. The rate of unemployment has fluctuated over time, nonetheless increased annually. Since 1948 until this year, the United States unemployment rate averaged 5.70 percent, with a record high of 10.80 percent in November of 1982 and the lowest rate of unemployment in May of 1953 at 2.50 percent. We have discovered the equation to finding the rate of unemployment, which is through dividing the amount of people who are unemployed by the labor force. The calculation of unemployment is vital to citizens because it gives the American people an idea of the amount of people who are jobless, and how the job market is actually maintaining according to population. Unemployment is an ongoing deficit that affects millions of people and companies worldwide.

The various types of unemployment mentioned in this essay all play a major role in determining the state of the jobless Americans and the type of skills possessed by individuals. For example, frictional unemployment is the time in between one goes from one job to the next. Frictional unemployment can also be a reason as to why there is no complete fulfillment of employment, since there are always circumstances for people wanting to change jobs.

Cyclical unemployment relates to the cyclical development in growth and production that take place during the business cycle. When the economic output declines, which is measured by the gross domestic product (GDP), the business cycle is low and cyclical unemployment will increase.  This type of unemployment is a common factor throughout recessions.

Structural unemployment is a form of unemployment that is from an inequality of skilled workers that are seeking employment and the demand in the labor market. The number of job openings may be equivalent to the number of unemployed people currently looking for work; however, the number of unemployed individuals may lack the appropriate skills or may not live in the part of the country where the jobs are available.

Having knowledge of the unemployment concept in the United States is vital for any working class citizen. Unemployment harms our daily lives and the environment because of the scarcity of jobs and limited growth in certain careers. Outsourcing has been a tremendous factor in creating unemployment in the United States. This puts a strain on cities and communities that were once built on producing large companies goods within the area because it affects the people and the amount of income they bring, and how money is circulated throughout a city.

With the previous statements made, one could draw projections about the future state of the unemployment crisis in the United States. To see more information on the economical charts of unemployment, please see the following attachments. If we continue to analyze the unemployment data from The Great Depression until now, the history repeats itself. As long as we have a market, unemployment will always remain constant.

Work Cited

U.S. Bureau of Labor Statistics. (2010). Retrieved from http://www.bls.gov/

US Legal. Labor Surplus Area Law and Legal Definition. (2001-2010). Retrieved from http://definitions.uslegal.com/l/labor-surplus-area/

Wikipedia. Unemployment. (4 December 2010). Retrieved from http://en.wikipedia.org/wiki/Unemployment