Unemployment Essay, Research Paper
Unemployment
The unemployment report is released periodically and it contained a big surprise for many
economists in 1996. Over the past months the reports showed the economy doing quite
well. This economy has been doing so well that some economists were worried about
reaching full employment rather quickly. Although the jobless would love that to happen,
full employment would lead to high inflation and destruction of the economy. The
consensus on Wall Street was that the Fed would have to raise rates until word got
around about the report. By day’s end, the mainstream were afraid of an economy that
will grow so slowly that rates will have to go lower.
The current unemployment rate is 5.3%. President Clinton is trying to create new jobs to
get everyone earning real wages. People want to know that he is opening job
opportunities but he also does not want full employment. This is a prime example of
politics. Tell people what they want to hear but do not let the economy stagnate. I guess
that is his hidden agenda. In effect, Clinton plans to strengthen employment and business
investments in poverty stricken urban areas. He plans to triple funds to lend to city banks
in order to foster economic development in poor neighborhoods. He will also try to triple
employment in public housing projects through a $10 million project involving HUD,
Rockefeller Foundation, and Chase Manhattan.
Many Southern states, seven to be exact, are about to cut their unemployment insurance
taxes by hundreds of millions of dollars. The Southern economy has seen tremendous
growth and people are forgetting the bad economic times. The region has also been
adding jobs at a constant pace. Unemployment has dropped to record lows in some of
these states. This risky act may spell disaster.
From a macroeconomic perspective, it is important to note that in the
major industrial countries, low unemployment usually creates inflationary
pressures. However, throughout the past few years of economic expansion in the
United States, prices have held steady despite low unemployment.
Unemployment Ever think about what happens to people when they loose
their job? Where do they go? What do they do? How do they provide for
their family? These are everyday facts about unemployment, one of the
largest measuring sticks for an economy. Unemployment is an important facet
of every economy. Although it may seem logical to keep unemployment rates
as low as possible, that is not the case. If unemployment rates drop to far
down, this may lead to inflation. The reason being that if there is a low
unemployment rate then there will be a shortage of skilled workers, thus
pushing employers to raise wages and benefits which will in turn raise prices.
Over the years, there have been really high highs and really low lows when it
comes to unemployment. Currently the unemployment rate is at it’s lowest in
twenty five years. The booming economy has helped drop the unemployment
rate to below four percent, which is the lowest since 1970. These low rates
have been caused by many factors. Some of which include growth in the
industrial output of the United States, a booming stock marke
natural elements such as recent hurricanes. In order to asses the affects of
these different factors on the unemployment rates, economists must have
some type of system to estimate the unemployment rate. One major system
that is used deals with the number of “help wanted” ads that are published.
This process is a compilation of the number of help wanted ads that are
measured in fifty-one major newspapers across the United States. These
counts are then converted into an unemployment percentage through the use
of an index. It is no secret that the goal of every country is to have a
productive and stable economy. One which will allow it’s people to function
and operate effectively. Currently in the United States, the economy is
booming. This boom in the economy has lead to a decrease of about four
thousand less new claims of unemployment per week. This drastically low
rate has posed a problem for economists, inflation. “The Growth of demand
has continued to outpace that of supply, as evidenced by a decreasing pool
of available workers” (CRUTSINGER). This has led economists to believe
that employers will begin to “woo” employees thus increasing prices and
causing inflation. The goal for the federal government has now become to
slow down inflation. There have been several different policies that have been
proposed to meet this goal but the most prominent one deals with interest
rates. Recently, the federal government has given many hints of a possible
increase in interest rates. Mainly they have been hinting about an increase in
the rates at which banks loan each other money which will in turn increase the
rates at which the banks lend out money to the public. This plan of action is
not being supported by everyone. Recently during a day of extensive trading
on Wallstreet, the market had been doing really well. There had been a gain
of 106 points for the day until the final two hours of trading when there was a
drop of 124 until the market closed with a net drop of 0.64 points. This
drastic drop in the market after the announcement of possible interest rate
increases shows that the majority of investors do not support this policy. they
are opposed to the increase in interest rates in order to control the inflation
due to the low levels of unemployment. The main supporters of this policy is
the federal government. The reason for their strong support of this policy is
their fear of inflation. They feel that if they raise the interest rates then that will
keep companies from “wooing” their employees thus keeping their prices at
current levels. I believe that having a low rate of unemployment is a
spectacular achievement for an economy. The lower the unemployment rate,
the
more people that are working which in turn help produce more for the
country’s economy. The current policy proposals seem to be a bit
unnecessary at the moment. With the current levels of unemployment being at
the lowest in over three decades, the United States economy is booming.
Things should be left the way they are despite economists fear of inflation.
For under the current conditions, America will continue to shine from sea to
shining sea.