The relationship between changing of labor force(total labor number ) and Unemployment rate - Research Paper Example

A high population creates a ready labor market that leads to high unemployment rates since people compete for the scarce job opportunities that are available (STOICA, pp.29). Fang and Nie (2014) argue that changes in the American labor market were as a result of the Great Recession that was witnessed in 2007.They argue that the recession adversely affected the supply of the labor market a move that forced the unemployment rates to soar high. The two authors seem to differ with the premises of the researchers whose ideas have been presented among other things.

They used the Mortensen-Pissarides model to explain the trend of the American labor market. Researchers agree that high unemployment rates are because of lack of proper transition during employment and retirement. However, they disagree on some factors that have been proposed to contribute to high unemployment rates in the US (Fang and Nie, p.1). Similarly, Hornstein (2013) attributes the 2007 Global Financial Crisis to the high unemployment rates in the United States of America. A majority of citizens were actively involved in the labor market something that had lead to a decline in the unemployment rates.

However, due to the recession, most organizations were forced to cut their workforces to control their costs at a time when most of them were experiencing financial challenges. Recession in 2007 caused significant changes in the labor market. Most employees were laid off whereas others were forced to retire prematurely. In addition, employment opportunities were unavailable for fresh graduates. Consequently, the unemployment rates rose sharply during the period. In 2009 unemployment rate, had increased to 10% up from 4% in 2007.

Interestingly, although economic recoveries have been made, the situation remains indifferent to the unemployment rate remaining at 7% despite the economic progress that has