Unemployment in America - Term Paper Example

Shella Awanchiri English 1010 Sharon Saylors Unemployment in America While the American economic recession in totality has long been on the forefront of public consciousness, even more prominent is the daily impact of the country’s still staggeringly high levels of unemployment. There are a number of fundamental issues with the American economy that underline the complicated relationship between unemployment and political and economic policy. This research considers the interaction between American unemployment and its causes through an analysis of recent employment trends. The analysis then is extended to examine a variety of macroeconomic concerns that have been argued to contribute to unemployment. In these regards, the research argues that Federal spending and the increasing National Debt are major areas of concern regarding investment that could contribute to improved unemployment. It then demonstrates that the very nature of the American political and economic sectors contain significant structural elements that are contributing to the country’s high and rising unemployment rate. Background After the Great Depression, the United States experienced unprecedented economic growth and progress almost until the end of the XX century. During the early years of the XXI century, this growth continued in sometimes staggering proportions with house prices steadily rising and Americans enjoying sizeable employment success. In 2008, this stopped. With the sub-prime mortgage crisis leading the charge, America and, eventually, the world economy experienced perhaps the greatest economic collapse since the Great Depression. American unemployment rose to staggering rates, leaving citizens and politicians equally perplexed about the future. Even as some progress has been made in staving off the tide of unemployment, including lackluster reform policies, in great part the American economy is still experiencing a large number of problems, most prominently in terms of employment. Analysis Unemployment Overview One of the overarching considerations in regards to unemployment in America is the unemployment rate. The unemployment rate, as the name indicates, is a statistical measure established by the United States government; it indicates the amount of Americans that are currently unemployed. The American unemployment rate over the last decade demonstrates a number of trends, some of them highly problematic. Unemployment Rate 2002-2007 While the unemployment rate was at a slightly high but manageable 5% at the beginning of the ten-year period, it lowered significantly through 2007 (Hupp 12). While the exact causes of this lowered rate are complex and multi-varied, a reasonable assumption can be made that the infusion of capital into the American economy coupled with technological innovation that placed the United States at the forefront of development greatly contributed to these shifting trends. Still, perhaps more problematic is the recognition that this declining unemployment rate – nearly reaching 4% in 2007 – is greatly contrasted with the startling spike caused by the 2008 recession (Hupp 12). Unemployment 2007-2009 The spike in the unemployment rate during 2007-2009 demands specific consideration be given to the juxtaposition of these rates and the potential causes of the Great Recession. This research argues that the declining unemployment rate between 2003 and 2007 is at least partly attributable to a bubble economy that was brought on by inflated home prices. The eventual mortgage crisis that would lead to the recessionary period and spike in unemployment was at least partially caused by a correction in the true value and production of the American economy. The Economist points out that even when the economy begins to recover certain job sectors may never see pre-recession employment figures. It argues that: “The past decade’s jobs in retail and in entertainment were largely supported by household borrowing. Not only is a new wave of borrowing unlikely to develop after the recession, but household deleveraging is nowhere near complete” (Economist). Reports such as this indicate that the recession and unemployment are not only temporary predicaments but also are components that are systematically reshaping the foundations of the American society. Unemployment Rate 2010 At the beginning of 2010, the unemployment rate dropped from 10 percent to 9.7 percent (Cook). In a Newsweek article that considers these figures, Cook identified a number of causes for optimism. Cook discussed the positive correlation between jobs increased in health care, government, and retails fields, and indicated that the average work-week increased to 33.9 hours. A New York Times (Leonhardt) article discussing the same report indicated similar positive indicators and speculated on the nature of the connection between the economy and the unemployment figures. It attributed the lowered rates to both the general flux of the economy and the most recent stimulus package. It states that: “All the well-known private economic research firms estimate that it’s had a huge impact. IHS Global Insight, for instance, says the economy has about 1.7 million more jobs today than it would have had without the stimulus” (Leonardt). While one would conceivably believe this to be indicative of a recovering economy, a number of researchers argue that these percentages are not as beneficial as observers might believe. Cook discussed that overall the unemployment rate remained awful, “men (10 percent), teenagers (26.4 percent), African-Americans (16.5 percent), and Hispanics (12.6 percent)” (Cook). Other negative indicators were that the number of people who had been unemployed for 27 weeks or more has actually increased with this report and that the amount of people who have stopped looking for work has increased to over 1 million, from the 500,000 figure of 2009 (Hupp 37). Unemployment 2011-2012 One considers that the unemployment rate since 2010 has witnessed a slow but steady decline. In 2011 the unemployment rate reached 9% (Hupp 36). Since this period, the rate further declined and currently resides at 8.2% (Hupp 36). While this decline is a positive sign, researchers consider that there are many things to remain concerned about. Notablly, over 14 million Americans are still looking for work. It is also estimated that for the economy to keep pace with population growth and for the unemployment numbers to at least remain stable, the country will have to produce more than 140,000 new jobs per month (Hupp 36). Other researchers state that the findings also indicate that the recession is worse than was originally assumed. The New York Times stated that the reports indicate the economy had 1.4 million fewer jobs last year than was originally reported. Even the maintainence of the current rate may be considered negative as wages are correspondingly decreasing. The Economist speculates on the interrelationship between wages, unemployment, and the economy. The article hypothetically asks if income growth could compensate for the large unemployment figures and actually contribute a beneficial effect to the economy. The article determines that this occurrence is implausible for a number of reasons. First, the employment market is such that job salaries have been kept in proportion to job growth, which is in large part negative. It states that “The plentiful supply of workers reduces the incentive for firms to hire quickly, and will allow companies to underpay well-qualified workers. Real earnings declined last year and are unlikely to experience rapid growth soon” (Economist). This indicates that the high unemployment figures are correspondingly decreasing wages throughout the country. Causes of American Unemployment While politicians and the varying perspectives of the public differ on exactly what is causing unemployment in America, it’s clear there are a number of notable foundational issues. One of the most notable issues is that while the country has experienced significant economic recession, the United States government has continued to spend at alarming rates. Statistics demonstrate that today Federal spending is more than eighteen times higher than it was in 1970 (Tanous 71). This is not a political party issue, as both Republican and Democrat administrations have demonstrated alarming spending rates. Even more notable is that projections demonstrate that such spending is not believed to be curtailed in upcoming years, but rather will increasingly rise, with an estimated 5.6 trillion dollars to be spent in 2010 (“What is Wrong”). While in a robust economy, such spending cycles may be necessary or make fiscal sense they are an important problem to consider, as the United States has increasingly become more in-debt. In fact, another major problem potentially contributing to unemployment is the growing National Debt. For instance, the United States’ National Debt is now fourteen times larger than it was as early as 1980 (Tanous 71). Basic common sense demonstrates that a country that continues to spend money that it does not have is standing on an unstable foundation. This unstable foundation makes businesses less willing to invest in the American economy, therefore further contributing to unemployment. Additionally, the rising interest rate on this debt could ultimately prove to be crippling to the American economic structure. If the United States is going to improve the unemployment rate, it is critical that the country resolve these spending and debt issues to ensure more economic weaknesses are allayed and business can thrive. In addition to these specific concerns, a growing number of researchers have argued that the very nature of the American political and economic sectors demonstrating significant structural elements that are contributing to the country’s unemployment. Charles Ferguson’s recent film Inside Job, which won the Academy Award for Best Documentary, argues that the American financial sector has become so strong that they have actually began to influence and shape the very political institutions that are supposed to be instituting economic reform (Ferguson). In these regards, it points to key academics and business professors receiving substantial sums of money from major financial institutions for consulting, lecturing, and writing. Tanous also notes that the strong lobbying power these institutions are able to wield is one of the major challenges that are standing in the way of reform measures being placed on the financial institutions that contributed to the employment collapse (Tanous 73). Ultimately, it is clear that in addition to internal economic concerns, America must address a number of pressing structural concerns that have damaged the country’s financial system. For the greater part of the XX century, America experienced tremendous economic success and employment, but with increasing Asian competition, and outsourcing of jobs, there has been a corresponding rise in unemployment. In these regards, unemployment has been steadily increasing in America since the 1970s (“What is Wrong”). This is a complicated issue, as corporations have slowly outsourced jobs overseas for minimal wage rates. The question becomes at what extent should they be allowed to continue paying what has been deemed “slave labor rates.” While these are the realities of the globalized world, they have been coupled in recent years with the collapsing American economy, which has in-turn resulted in staggering unemployment rates. The unemployment rate is perhaps the hot-bottom issue within the American economy with researchers noting that currently the average duration an individual stays on unemployment – over twenty-weeks – is the highest it has been since World War II (Tanous 73). While robust stimulus packages have been argued to stem the tide of unemployment, they have also contributed to the growing debt and not been effective enough in restoring the American economy to its pre-recession levels. Ultimately, it is clear that unemployment is one of the major problems in the American economy. Conclusion In conclusion, this essay has considered American unemployment. Within this context of investigation American unemployment is contextualized within the broader consideration of the current recession. As a means of analyzing unemployment specific analysis of the unemployment rate over the last ten years is established. Following this examination, the research links specific problems with the American economy and structure to the unemployment. The research argues that the first problem is Federal spending and the increasing National Debt. This is an important concern as the rising interests rates could ultimately cripple the country and deter investment in business that could create jobs. The second problem is the very nature of the American political and economic sectors as demonstrating significant structural elements that contribute to the country’s unemployment rates. This is the most complex, yet perhaps the most important concern, as without meaningful financial and political reform the country will not be able to create new jobs. Ultimately, it is imperative that these employment concerns be addressed to ensure America regains it position of financial security and economic prominence. Works Cited “Bureau of Labor Statistics Data.” Bureau of Labor Statistics. N.p., 2012. Web. 2 May 2012. . Cook, Nancy. “Unemployment Rate Drops Unexpectedly. Time to Celebrate? Nope”. The Daily Beast. Web. 13 Feb. 2010. “The curse of long-term unemployment will bedevil the economy.” Economist. 14 Jan 2010. Web. 13 Feb. 2010. Ferguson, Charles. Inside Job. Film. Columbia Pictures, Film. 2010. Hupp, Scott. Roller Coaster of Unemployment. West Conshohocken, USA: Templeton Press, 2010. Print. Leonhardt, David. “Finding Hope in the Jobless Numbers.” The New York Times. 5 Feb. 2010. Web. 4 May 2012. Tanous, Peter. Debt, Deficits, and the Demise of the American Economy. New York: Wiley Press, 2011. Print. “What is Wrong With the U.S. Economy?” The Economic Collapse. n.p., 16 Feb. 2011. Web. Read More