Why Did the Unemployment Rate Drop - Book Report/Review Example

Why Did the Unemployment Rate Drop? Summary Izzo discusses in ‘The Wall Street Journal’ about the reasons of the reduced unemployment rate in US recently. The writer states that the drop in the unemployment rate in the month of April is attributed to the people dropping out of the labor force. Many people give up seeking the job for the reasons such as they want to retire or for domestic reason such as child care. The numbers of employed people are reduced by 169,000 though the broader unemployment rate has remained unchanged in the month of April. The broader unemployment rate takes into account everyone including those who say they need job. Also included are the people who have been working part-time for their own reasons. Critical Analysis There is no definite sign of real improvement in the unemployment rate in the US. The writer argues that though the unemployment data suggest that the unemployment rate has dropped by 8 percent but in reality it is not. That can be noticed by the data that speak about the broader measure of unemployment rate and that has remained unchanged at 14.5%. Economy is still not in a positive territory. The reduction in unemployment rate is a good measure of improved economic condition but that does not seem to be forthcoming and the job seekers are desperately waiting for the time so that they could have meaningful employment of their choice. That is evident from the fact that the number of workers involved in part-time jobs has been now turning to the full-time workers. Critical Question The most critical question raised in this article is that the US is still facing unemployment issue at large though there is some sign of improvement. Article: Economists Warn of Long-Term Perils in Rescue of Europe’s Banks Summary Ewing forewarns in 'The New York Times' that the situation is being created of another banking crisis by providing cheap credits to the sick banks. Quoting Charles Wyplosz, a renowned professor of economics, the writer states that it will be a big miracle if ECB could pull off Europe from the current crisis. If the action fails to correct the situation, it may create much worse situation for complete banking sectors. The European Central Bank provided loans to commercial banks at meager 1% interest rate and that is too for a longer three years' period. Banks were allowed to borrow as much as they needed by posting collateral. On this opportunity, banks collectively borrowed some 489 billion of Euros which amounts to $647 billion. To facilitate smaller banks, the Central Bank even loosened its rules of providing collaterals so that banks could garner cheap credits on more easy terms. Critical Analysis Many weak banks in Europe have been saved off or given a breather by the European Central Bank by providing cheap credit to them. Time being, it might arrest further economic downturn. The noteworthy point is that the credit has been made available to them for the duration of three years giving them ample time to readjust their strategies. In Europe, banks are the major source of credit and not the capital markets and in this context central bank’s initiative may help restore the health of the economy in Europe. The intention of the central bank is to put the economy of European Union back on track and raise the confidence level of the businesses and the investors. Borrowing any amount at 1 percent against collateral will give banks enough business opportunity including buying bonds to earn higher returns and that is certainly a good deal for them. Critical Question The most critical question is how banks will be using the money that they get from the Central Bank for the period of three years. And what will happen if they do not use the money wisely? The banking industry can do a lot in this endeavor of European Central Bank but the moot question is – will they do? Article: Depth of Recession Makes Recovery Look Worse Summary Casselman argues that the US has added around 3.7 million jobs after February 2010 at the average rate of 134,000 per month and in past six months the average addition of jobs has been 197,000 per month. Though increase in job addition is meager when compared with earlier recoveries observed in 1970s and 1980s but still it augurs well when compared to the recovery post 2001. The US lost almost 8.8 million jobs during the year 2008 and 2010. Even after counting some recovery, at least 5 million jobs are yet to be replenished to achieve the pre-recession levels of employment. The construction industry itself has lost almost 2 million jobs and yet no recovery is in sight. The restaurant and healthcare-sector and other industries have fared better. Currently, the government sector is not a big employer now in comparison to private sector. The private sector has added 2 million jobs but at the same time the government sector has eliminated 215,000 jobs. The cut in school budgets have reduced significant women jobs but the unemployment rate for women and men both are almost same. Critical Analysis The recession had a significant impact on the employment opportunities in US. The biggest loss of jobs has occurred in the construction sector to the tune of 2 million jobs and that is a huge by any measure. In order to have a significant leap in job numbers, the revival of construction sector is necessary and that seems difficult looking at the housing inventory levels in all states. Though some private sectors such as healthcare and restaurants have fared better and have added 2 million jobs but the government sector has ceased to be a big employer impacting heavily the reduction in unemployment rate in US. Critical Question The most critical question is that when construction industry will start recovering because biggest dent in the employment numbers has been created by this sector. Moreover, it is to be seen how and when the government spending in the education sector will begin so that it can become a forceful employer in the job market. Article: A flicker of Hope Appears in the Housing Market Summary Norris argues in this article that the oversupply of homes owing to boom in housing market during the last decade in US is now vanishing fast in most parts of the US. This can be seen as a major impediment removed for the revival of the homebuilding industry. The writer states that between 1963 and 1996, on average, 376 homes were sold for every 100,000 residents of US. The biggest housing boom was seen during middle of the last decade but with the onset of recession and credit crisis the housing industry deflated. Surprisingly, the average rate of housing units sold during the boom and bust period combined – beginning from 1997 through this year, has remained almost unchanged at 375. Looking at the separate statistics of the boom period from 1997 until 2007, almost 1.8 million more homes were sold than the national average; similarly, between 2007 until current period almost 2 million fewer homes were sold. Thus, both periods when combined even out the sale. The stringent credit standard is a big impediment in the creation of the new housing demand. The sales in the first quarter of the current year have gone up by 17 percent compared to the same period of 2011. This is a largest annual rise since the year 2004. Critical Analysis Once large housing inventory is exhausted, market has a good chance to recover and it is gradually moving in that direction. Those who stay in a smaller house would eventually look to move up and those who stay with their parents or relatives would also look up for their own homes as soon as they settle. Stringent credit norms could become a big hindrance in the creation of new housing mortgages for many, particularly those who have a tainted credit history in the recent financial crisis. Critical Question The revival would greatly depend upon the unemployment rates in the coming quarters. The most critical question is when the unemployment rate in US will reach to the pre-crisis levels. Works-Cited Izzo, Phil. "Why Did the Unemployment Rate Drop?" The Wall Street Journal. The Wall Street Journal blogs, May 2012. Web. 10 May 2012. ‹http://blogs.wsj.com/economics/2012/05/04/why-did-the-unemployment-rate-drop-7/› Ewing, Jack. "Economists Warn of Long-Term Perils in Rescue of Europe’s Banks". The New York Times. The New York Times, February 2012. Web. 10 February 2012. ‹http://www.nytimes.com/2012/02/13/business/global/low-interest-loans-to-european- banks-prompt-concern.html?r=2&pagewanted=all› Casselman, Ben. "Depth of Recession Makes Recovery Look Worse". The Wall Street Journal. The Wall Street Journal blogs, May 2012. Web. 10 May 2012. ‹http://blogs.wsj.com/economics/2012/05/04/depth-of-recession-makes-recovery-look-worse/› Norris, Floyd. "A flicker of Hope Appears in the Housing Market". The New York Times. The New York Times, April 2012. Web. 11 May 2012. ‹http://www.nytimes.com/2012/04/28/business/economy/a-flicker-of-hope-appears-in-the-housing-market.html?_r=1›. Read More