Unemployment Explained

The U.S. unemployment rate soared to 7.6% this month, up from 7.2% in December. The 4% increase represents. almost 600.000 jobs lost. On January 26th announced lay offs of businesses 37.000 jobs in one day.

We hear these numbers but most don't understand what they mean. The 7.6% unemployment rate does not represent the amount of United States citizens who are not working. Instead, it represents the amount of people actively seeking employment who cannot find it.

The type of unemployment being talked about here is largely something called cyclical unemployment. This is a natural byproduct of the normal upward and downward movements of the economy. In other words, what goes up will eventually come down and then back up. If unemployment is high right now, down the roadthe natural movement of the economy will cause the rate to drop and most will go back to work. Of course this doesn't help those that are presently unemployed .

History suggests a couple of truths: First, when unemployment is high "certain people will blame others for the" failures "that caused it. Second, history suggests that although we can pinpoint a downturn, the identified failure is probably secondary to the normal movements of the economy.

There is one type of unemployment that is considered positive. Frictional unemployment occurs when a new college graduate is searching for a job or when a worker quits one job to search for a better job, often as a result of more training. From a purely economic angle, we do not want the frictionally unemployed toaccept the first job offered to them because they are most likely working below their skill level which is a negative for the economy.

How does unemployment affect the nation's physical health? Dr. m. Brenner conducted a study in 1979 on the "Influence of the Social Environment on Psychology." Brenner found that for every 10% increase in the number of unemployed there is a 1.2% in total mortality, a 1.7% increase in cardiovascular disease, 1.3% more cirrhosis cases, 1.7% more suicides, 0.4% more arrests, and 0.8% more assaults reported to the police.

What can be done about unemployment? First, it's important to note wages, just like most other economic factors can become inflated. Labor unions, individual pride, and other factors will often keep wages from correctingwhich can lead to unemployment I know one solution may be to remove the obstacles to wage correction.

Another way is to artificially stimulate the economy which will cause jobs to be created. The current Obama Stimulus Package is reportedly creating jobs by creating government infrastructure projects that will cause private companies to hire more workers.

Some argue that the economy must be allowed to move up and down and any time the government interferes, it delays the sometimes painful movements of the economy. Others argue that the economy is real people and we can't ignore the problems of real people.