Steven Christopher - Unemployment Rate

Steven Christopher

11/26/12

Blog Post #1

http://www.cartoonstock.com/newscartoons/directory/u/unemployment.asp   

Cartoon 4 and 5

Throughout our countries history there have been 10 recessions since 1945, and we have managed to climb out of them successfully. The most recent began in December 2007 and ended in June 2009. Many economists state that the U.S. economy is doing well, but we have still yet seen our condition return to pre-recession values. One of most important topics when dealing with the current recession is the unemployment rate and job loss. Unemployment fell more rapidly during this recession than any prior. Millions of Americans have lost their jobs over the recession and it is recorded that it peaked to 10% of the United States in October of 2009. Today, as we discussed in class, the unemployment rate is currently 7.9%. This statistic demonstrates that the economy is improving, and that more jobs are being created for Americans. However, recently in class we brought up the topic that some people might be giving up after not being able to become employed after a certain period of time.

            When job losses skyrocketed in 2008, Congress passed emergency measured to supplement state-level unemployment insurance programs, which generally offer about 6 months of benefits. In class today, we learned that at their peak, the federally backed programs extended benefits to up to 99 weeks in some states. In Virginia the maximum duration of unemployment-insurance benefits is 40 weeks, as of November 2012. Although this plan seemed to help in the beginning, most states do not qualify anymore to the generous programs due to cut backs. In my opinion, these programs created instances where people were trying to find jobs, but eventually stopped momentarily because they were still receiving some benefits from the federal government. Could it be possible that these people that no longer look for work have skewed the unemployment rate, is it higher than predicted this past month? I believe that people say they might have stopped looking for jobs because they have become depressed, tired of looking for work, or fell into unemployment benefits and were temporarily not searching for jobs.

            There are three types of unemployment that we include when talking about the unemployment rate. Structural unemployment deals with the mismatching of skills, frictional deals with a mismatch between job seekers and employers, and cyclical deals with unemployment due to the business cycle. In the current recession, I believe that most of the unemployment is caused by frictional and cyclical unemployment.  People are going after the high paying competitive jobs that they are not matched for. Too many people want the high paying jobs and will not take middle class jobs. This generates unemployment because they turn down the opportunities they have for the chance that one day they could get a higher paying job. Cyclical unemployment is clearly the main reason for unemployment. As of now, 7.9% of Americans are unemployed because there are a limited number of jobs being created. The depletion of their jobs at the beginning of the recession made it very hard for these particular people to come back into the work force.

            From this cartoon we can see that people still believe we are in a recession, and will continue to be for a couple years. For the recession to truly end we need to see the unemployment rate drop significantly. People are still constantly searching for new opportunities and have driven some citizens to stop looking for jobs. I believe that we need to create an unemployment statistic that includes the amount of people that have stopped looking for jobs because of the business cycle and cyclical unemployment. To get an idea of the true unemployment rate, we must know how many people have given up hope when searching for a new job.