Response to Job Growth Steady, but Unemployment Rises to 7.9%

Response to Job Growth Steady, but Unemployment Rises to 7.9%

The article brings up some very interesting points about why job growth doesn’t necessarily affect the unemployment rate. I think it can be because of a high number of entrants into the labor market, the dropping out of the labor market, and high taxes.

The unemployment rate isn’t going to drop when 150,000 jobs are created while 160,000 new people enter the job market. Just because there is job creation doesn’t mean our economy is actually meeting the labor demand. It could also be because these are government stimulated jobs so government spending is increased which ultimately does not let the private sector grow. If the effect of the new jobs came from private sector growth then we could most likely see even more growth and job creation to match the labor supply which would drop the unemployment rate.

The article points out the millions of unemployed that are now no longer unemployed because their time allotted on benefits has run out. It has actually been seen that when a very large number of people drop from the labor force, it could make the unemployment rate lower because of the change in people looking for work. Finding work is difficult and as people become unmotivated to look for work, they ultimately have trouble reentering the labor force.

The article also points out how fiscal policy to create economic growth can result in high taxes. High taxes can take away money that business owners could put towards more labor. Because there is less money towards labor, there is a higher unemployment rate. If fiscal policy could lower taxes with decreased government spending, private sector employers according to Keynesian thought, will lower the unemployment rate.

This article pointed out some very interesting statistics in regards to unemployment. The author does a good job of showing statistics that show poor relations with the unemployment rate. However, it didn’t necessarily answer the questions and issues it presented. My response tried to suggest solutions to these issues. The solutions are to allow for job creation to come from the private sector market. Also, when millions drop from the work force we see a drop in the unemployment rate. This isn’t a good way for the rate to drop and we must motivate the workforce to continue looking for work. Lastly, lower taxes in fiscal policy can create more jobs because businesses will have more money to use towards labor.