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Unemployment Rate in the US

Causes, Effects and Solutions for Unemployment

Luther Saint Jean

AP English Literature 1

Mr Janosch

11/30/2018
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Unemployment Rate in the US

Jon Creek, who lives in Cincinnati, Ohio, was a construction company office manager

until he was laid off in December 2007. He was stunned when he received his final paycheck.

His job was over. The harsh part was that his boss posted it on facebook before telling him.

Everyone knew but him. “I worked hard, I did everything right,” he says. Ever since he has been

looking for a job. Being unemployed not only hurts financially but also leaves emotional scars.

“It’s very isolating, very lonely,” he says. It’s not just about the salary, it’s about being able to go

out and say, I do this. “This is my identity,” says Creek, who has an $11,000 student loan. (AP)

“Unemployment is an indicator to the total number of people who are willing to work but

can’t find jobs. The unemployment rate in the US now is at a 3.9 percent.” That is the lowest it’s

been since 1969. The government finds the unemployment rate based on two surveys. The first

survey, the Establishment Report, asks a sample of random employers how many people are on

their payroll. The second survey, the Current Population Survey (CPS), asks approximately

60,000 households how many people are currently working or looking for a job. The responses

help produce an estimate of unemployed people (Krulick). Most recently, from a low of 4.7

percent in 2008, it took a peak to 10.1 percent in 2009. Aside from the low levels of

unemployment before the recession (when it hit 2.5 percent), it normally bottoms out to a 3.8 or

3.9 percent. “If the unemployment rate stayed at a 3.9 percent, it would be healthy for the

economy but that almost never happens.” It usually goes upward as soon as it hits the low.

Because the rate is an indicator, it’s possible there is a gap in the economy. If so, there may be

room for improvement. None of this means there is about to be another recession but historical
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data suggests that even the most positive economic news may bring ill tidings. Unemployment

doesn’t affect the economy alone but also the individual. Unemployment in a long term can

cause emotional and psychological destruction (Mihm). Because unemployment can cause

workers to lose their skills and cause gaps in the economy, the United States should create new

and better jobs.

“The United States started to keep track of the rate of unemployment in the 1950s.” They

were still able to ascertain that the Great Depressions’ unemployment rate was 23.6 percent. The

lowest rate was a 1.2 percent in 1944 during World War 2. The lowest post-war rate was a 2.9

percent in 1953. The United States faced 11 recessions since the end of the postwar period. In

the 1980s, the rate dropped to 10.8 percent, falling to a 5.3 percent by the end of President

Reagan’s second term. During George H. W. Bush’s term it went back up to 7.5 percent. During

Bill Clinton and George Bush’s term it remained in between 4 and 6 percent. It stayed above 8

percent until 2012 (Krulick).

There are 3 types of unemployment causes: frictional, cyclical, structural. “Frictional

unemployment occurs when a person is searching for a new job or is transitioning between jobs.”

An example would be seasonal employment such as agriculture and construction. Because the

work is done for the season, the workers then become unemployed. “Structural unemployment is

when there is a mismatch in the industrial composition of a local economy.” For example the

worker is specialized in a background that cannot be used in the industry they work in. They lack

the skills to perform. Another example is where an area has workers with no available jobs.

“Cyclical unemployment is when there is not enough demands for goods and services in the
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economy to provide jobs for everyone.” It occurs when consumers have less money to spend on

goods causing layoffs and more unemployment. An example would be an auto worker. They can

be laid off during a recession when less people buy cars. The automakers don’t need as many

employees to meet consumer needs so they become unemployed (Amadeo).

Unemployment affects the society in many ways. “It affects the individual who is

unemployed with their income and health.” They won’t be able to pay off their bills and buy

essentials necessary for everyday life such as food. This often leads to stress and depression

which can affect your health. “A Pennsylvania study found that unemployed workers died more

than a year earlier than average.” There are also social consequences of unemployment such as

crime. A study confirmed that people who are unemployed for “socially unacceptable reasons”

are “significantly more likely” to commit robbery or burglary. Another effect of unemployment

is in the economy. “When unemployment increases both state and federal governments pay

increased benefits.” The government has to borrow money to pay for these unemployment

benefits causing a gap in the economy and reduce spending in other areas. (Gleeson)

“Controlling unemployment depends on the type of unemployment.” Cyclical is usually

the biggest type of unemployment. Because it is related to and can contradict the business cycle,

it can lead to recessions. “The primary method is the expansionary monetary policy. It is when

the Federal Reserve changes the policy by reducing the federal funds rate.” It is when the central

bank uses its tools to stimulate the economy. This will increase the money supply, lower interest

rates, and increase aggregate demands. Lowering the interest rate will cause businesses to

borrow money to buy equipment and hire more workers. This will also boost the market and
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other personal consumption spending such as auto sales. “The second way the government

reduces unemployment rate is through the expansionary fiscal policy.” That is when the

president and congress directly create jobs by spending more on government projects. An

example was the New Deal by President Franklin D. Roosevelt. Another way is by giving people

more income to spend by cutting taxes. For example, the Bush and Obama tax cuts in 2001 and

2010. A decrease in taxes communicates to the businesses that the government is interested in

reviving the economy. “Often times the unemployment is uncontrollable when people are in

between jobs (frictional unemployment).” This type of unemployment is healthy for the

economy. This means that the workers will be free to quit jobs in pursuit of a better one

(Amadeo).

Because unemployment can cause workers to lose their skills and cause gaps in the

economy, the United States should create new and better jobs. In order to maintain a healthy

economy and prevent a recession, the government should encourage exports, reduce interest

rates, cut taxes and focus on infrastructure development. As individuals, we can avoid

unemployment by studying for and working a job we enjoy doing.

Work Cited
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Amadeo, Kimberly. “What Is Being Done to Control Unemployment?” The Balance Small

Business, The Balance, www.thebalance.com/what-is-being-done-to-control-

unemployment-3306220. 29 November 2018

AP. “These Stories Of The Long Term Unemployed Will Make You Want To Get Down On

Your Knees And Thank Your Boss.” Business Insider, Business Insider, 12 Feb. 2012,

www.businessinsider.com/long-term-unemployment-stories-2012-2. 29 November 2018

Gleeson, Patrick, Ph.D, “The Overall Effects of Unemployment.” Small Business - Chron.com,

Chron.com, 29 June 2018, smallbusiness.chron.com/overall-effects-unemployment-

37104.html. 29 November 2018

Krulick, Al, Staff Writer. “United States Unemployment - History, Causes & Consequences.”

Debt.org, www.debt.org/jobs/unemployment/united-states/. 29 November 2018

Mihm, Stephen. "Unemployment hits a low. Then comes the recession." Indianapolis Business

Journal, 18 May 2018, p. 21. General OneFile,

http://link.galegroup.com/apps/doc/A541638380/GPS?u=nysl_me_73_shb&sid=GPS&xi

d=e7ba353f. 29 November 2018