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 market, and some

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.