essay of rate of unemployment

Unemployment Essay

500+ words essay on unemployment.

Unemployment is a serious problem among young people. There are thousands of people who do not have any work to do and cannot find work for themselves. Unemployment refers to the situation where a person wants to work but cannot find employment in the labour market. One of the major reasons that contribute to unemployment is the large population of India and the limited availability of resources. In this essay on unemployment, we will discuss all these issues responsible for unemployment in India and how we can overcome this problem. Students must go through this unemployment essay to get ideas on how to write an effective essay on the topic related to unemployment. Also, they can practice more CBSE essays on different topics to boost their writing skills.

Unemployment is measured by the unemployment rate, defined as the number of people actively looking for a job as a percentage of the labour force. The unemployment rate for the year 2013-14 in rural India was 4.7%, whereas it was 5.5% for urban India. In the short term, unemployment significantly reduces a person’s income and, in the long term, it reduces their ability to save for retirement and other goals. Unemployment is a loss of valuable productive resources to the economy. The impact of job loss in rural and regional areas flows through the local community, damaging businesses.

Reason for Unemployment

An unemployed person is one who is an active member of the labour force and is seeking work but is unable to find any work for himself. There are multiple reasons behind the unemployment of a person. One of them is the slow economic growth, due to which jobs in adequate numbers are not created. Excessive dependence on agriculture and slow growth of non-farm activities also limit employment generation. Unemployment in urban areas is mainly the result of substantial rural migration to urban areas. This has also resulted in a labour workforce in cities. The lack of technology and proper machinery has also contributed to unemployment.

The present educational system is based on theoretical knowledge instead of practical work. Thus, it lacks the development of aptitude and technical qualifications required for various types of work among job seekers. This has created a mismatch between the need and availability of relevant skills and training. This results in unemployment, especially among the youth and educated people with high degrees and qualifications. Apart from it, the lack of investment and infrastructure has led to inadequate employment opportunities in different sectors.

Steps to Eliminate Unemployment

Various strategies and proposals have been implemented to generate employment. Many Employment programmes and policies have been introduced and undertaken to boost self-employment and help unemployed people engage in public works. The Government of India has taken several policy measures to fight the problem of unemployment. Some of the measures are the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), National Skill Development Mission, Swarna Jayanti Shahari Rozgar Yojana (SJSRY), Regional Rural Banks (RRBs).

Despite the measures taken by the government, India remains a country experiencing severe unemployment problems. It can be resolved by imparting education in such a way that youth get the necessary skills so as to get employment easily. Setting up various vocational training and vocational courses for undergraduate and postgraduate students will help in finding employment for youth. The government needs to emphasise these courses at the primary level and make them a compulsory part of the curriculum to make students proficient in their early stages of life. Career counselling should be provided within schools and colleges so that students can choose a better career option based on their interests and ability. Government should create more job opportunities for the youth and graduates.

India is a fast-growing economy. There is an enormous scope for improvement in the unemployment sector. The various measures and steps taken by the government to increase the employment rate have succeeded to a great extent. The widespread skill development programmes have gained popularity across the nation. With better enforcement of the strategies, the employment level can be significantly improved. Although, we have to go a long way before we can say that all the people in India will get employment.

We hope this essay on unemployment must have helped students in boosting their essay-writing skills. Keep learning and visiting the BYJU’S website for more study material.

Frequently Asked Questions on Unemployment Essay

Is unemployment still an existing problem in india.

Yes, unemployment is still a serious issue in our country. Steps need to be taken by the government and also by the youngsters in India to improve this situation.

Is it necessary for schoolchildren to be informed about unemployment?

Students at this young age should definitely be informed about this topic as it will motivate them to study and aim for higher scores in exams.

What points are to be added to an essay topic on Unemployment?

Add details about different age groups of people suffering from this state of employment. You can focus on the fact that poverty is an indirect reason for unemployment and vice-versa. Then, suggest steps that can be taken to bring about an improvement in education and increase the percentage of literacy.

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AP®︎/College Macroeconomics

Course: ap®︎/college macroeconomics   >   unit 2.

• Unemployment rate primer
• Natural, cyclical, structural, and frictional unemployment rates
• Worked free response question on unemployment

Lesson summary: Unemployment

• Unemployment
• Types of unemployment and the natural rate of unemployment

Lesson overview

Key takeaways, the labor force participation rate (lfpr), limitations of the unemployment rate, three types of unemployment, the natural rate of unemployment, changes in the natural rate of unemployment (nru), key equations, the labor force:, the unemployment rate (ur), common misperceptions.

• Not everyone who is out of work is unemployed. In order to be counted as unemployed you have to be out of work, looking for work, and able to accept a job if one is offered to you. If you are out of work and not looking, then you are considered “not in the labor force” rather than unemployed.
• We tend to think of unemployment as an undesirable thing, but a certain amount of unemployment is actually part of a healthy economy. Structural unemployment occurs when new industries are created and old industries become obsolete. For example, when we moved from using horses and buggies to using cars to get around, this put a lot of buggy makers in the structurally unemployed category.
• Frictional unemployment might not seem very fun, but consider what it means to have zero unemployment—nobody ever looks for a job, they just remain in whatever job they are given! In fact, a number of dystopian novels have been written in which everyone in a society is automatically assigned a fixed career (such as the Divergent series). Those societies have zero frictional unemployment, but they are also quite unpleasant if you are unhappy with that career!
• A decrease in the unemployment rate isn’t necessarily a sign of an improving economy. When people stop looking for jobs and drop out of the labor force as discouraged workers, the unemployment rate will decrease even though the true employment situation hasn’t gotten any better. This is why it is important to look at both changes in the unemployment rate and changes in the labor force participation rate. Looking at both changes let’s you get a more complete idea about changes in the employment situation.

Discussion Questions:

• An inventor in Burginville developed a fantastic new dictation machine that perfectly records speech and turns it into a typed document. Unfortunately, that meant that unemployment increased among typists working in offices. Which type of unemployment is this? Explain. Solution, please. This is structural unemployment because typists skills are no longer desired. The changing structure of office work has resulted in people losing their jobs.
• The nation of Fitlandia has 120 , 000 ‍   people. Of these, 20 , 000 ‍   are children under the age of 16, 72,000 ‍   have jobs, 8,000 ‍   don’t have jobs and are looking for work, and 20,000 ‍   people are retired. Assuming that these are all noninstitutionalized civilians, calculate the labor force participation rate and the unemployment rate. I think I got it. Can I check my work? L F = # Employed + # Unemployed = 72,000 + 8,000 = 80,000 L F P R = L F Eligible Population × 100 % = 80,000 100,000 × 100 % = 80 % U R = # Unemployed # Labor Force × 100 % = 8,000 80,000 × 100 % = 10 % ‍  
• Explain why a decrease in the unemployment rate can actually signal a tough job market.

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Essay on Unemployment Rate

Introduction

The essay is focused on examining the issue of unemployment among people in various societies and countries around the world, the reasons for unemployment, types of unemployment, ways to overcome the issue of unemployment and examine the costs associated with unemployment. Unemployment is a major social issue among people in the economic market today, there are several reasons for unemployment in economics depending on the type of unemployment available, these can be directed to government, employer, supply of labor, among others. The types of unemployment can be directed to frictional unemployment, structural unemployment, cyclical unemployment, and seasonal unemployment. There is a need to solve the unemployment problem in the social economies, this can be done in several ways including enhancing political stability, promoting education, controlling the growth of population, among others. The issue of unemployment in the social economies has several costs ranging from loss of income among individuals, low standard of living among unemployed people, low production, and economic growth, among other costs.

Unemployment and reasons for unemployment

Unemployment is a major problem in various countries around the world, this is a situation whereby people do not have any work that can generate income and are actively searching for a job (Hauser & Burrows, 2018). Individuals in this situation are mostly employable and are actively searching for jobs. This can also include people who are working in jobs that are below their qualifications, experience, and satisfaction. The situation where there is a high level of unemployment will result in several economic distress and problems. The situation of unemployment hinders people to engage in productive work to facilitate development in the country. This will result in a decrease in economic productivity and development (Hauser & Burrows, 2018).

The two categories of unemployment are voluntary and involuntary unemployment, the situation where one moves out from a job to search for another is known as voluntary unemployment, and a situation where a person is laid off and now looking for a job is known as involuntary unemployment. Wolcott et al., (2020) in 2020, the coronavirus pandemic affected Singapore and the world, causing a high level of involuntary unemployment. There are several reasons for unemployment, inadequate job opportunities in a country can cause unemployment in the country. The slow economic development issue can result in unemployment, especially when the population growth is increasing.

The high growth of the population can result in unemployment challenges when the country is not developing and when fewer job opportunities are in the country. Also, people who depend on agriculture production work can become unemployed when the season is not favorable for plant growth. A decrease in industrialization and investment can account for unemployment in several countries that are not developing, the situation where there are few industries and investments are not available will have a severe influence on the employment of people in a developing country. Improper economic planning can also result in unemployment challenges, situations, where there is a gap between supply and demand of labor, which will result in unemployment.

Various types of unemployment

Hauser & Burrows, (2018) Types of unemployment can include frictional, cyclical, structural, institutional, and seasonal unemployment. These types of unemployment are based on voluntary and involuntary unemployment. Frictional unemployment is a situation where a person voluntarily moves from one job to another in a country. The time spent to get another job can be linked to unemployment, it may take some time before the person gets another job. Some people move to another location to search for a new job which can take some time before getting the desired job. When fresh graduate students’ transit to search for a job, the time spent before getting a job is also linked to frictional unemployment. The time can be very short or longer depending on the availability of the job the applicant is seeking (Hwang, 2019).

Hwang, (2019) cyclical unemployment is another type of unemployment where the decrease in production and demand for products results in a decrease in employment of new workers. The situation where a company is not getting enough purchases of goods from the market will decrease income level and ability to pay workers. This can lead to a decrease in salary, and an increase in savings. People will not be able to buy enough goods when their salary is decreased and savings are increased. The situation is cyclical in nature but can be resolved when economic growth and investment are facilitated in the country.

Structural unemployment is when there is a new change in the operation of a business, technology, and production. The situation whereby a company adapts to a new technological system or process will result in laying off workers who do not have the relevant skills for the new changes. There will be a need for retraining of staffs or workers to understand how to use new systems in the company (Wolcott et al., 2020).

Institutional unemployment occurs when there are changes in policies, institutional incentives, and interference of the free market condition in a country. The change in employment policies and strategies can result in laying off some workers in order to regulate the new policies.

Seasonal unemployment is a situation whereby workers that depend on jobs that operate in different seasons are not having jobs due to the unfavorable season or weather conditions to engage in such jobs. An example is farming, among others.

Various ways to overcome unemployment

Education is very important in solving the problem of unemployment, educating people will help increase their skills and ability to be employed and start their own businesses. Education will enable workers to advance their skills and employability level. The education system has to be improved in order to enhance the admission of students into higher studies in colleges and universities. The availability and improvement of vocational institutions can also facilitate the development of skills among students in the higher level of education. Students from these training institutions can start their own businesses after completion and reduce the unemployment rate in the country. The industrial technique can be enhanced to identify the employment needs of the country and improve labor-intensive technology in order to employ more people instead of using machines and other fully technological systems (Sari, 2019).

There is a need to design a policy to solve seasonal unemployment issues, mostly in the agriculture sector, the provision of alternative job opportunities for workers who depend on seasonal jobs will help reduce the unemployment rate during unfavorable seasons. Also, the use of multiple cropping can be encouraged in order to facilitate the production of crops favorable in any given season. The addition of varied plantations, animal husbandry, food processing, and other farming practices will enhance employment.

The use of communication and employment exchanges can be provided to enhance the dissemination of information regarding job opportunities available anytime. This will alert the public in order to enhance the employment rate and reduce frictional unemployment. There is a need to assist self-employed individuals in order to facilitate their work and production. This can be in a form of financial support, technical training, and raw material support in order to improve self-employed businesses.

The development and implementation of policies that encourage the development of more jobs in a country will help reduce unemployment. There is a need to increase development of jobs in a country and increase employment of labor in order to help them gain benefits and contribute towards societal development. There can also, be enhanced employment program facilitation, this is done by setting plans to develop infrastructure, power supply, roads, and other facilities that encourage production (Sari, 2019).

Costs associated with unemployment

There are some costs associated with unemployment which include individual and societal costs; the major cost to unemployed individuals is income lost, this is the situation where a person does not get any income due to unemployment. Unemployment affects people’s ability to earn money. The situation can hinder people’s ability to finance and take good care of themselves. The well-being of people becomes disrupted due to a lack of income to support themselves. The cost to society is a reduction in productivity through a decrease in goods and services, the people do not have money to purchase goods and services, this also affects the performance of companies and organizations in the society. The situation also causes waste of resources including labor, since the economy does not utilize these resources efficiently. The situation, when people take up jobs below their qualifications, brings about inefficient use of labor. This also results in the loss of skills and labor capital in the economy (Alrasheedy, 2019).

The situation of unemployment can affect the health of people in the country, this includes the mental and physical wellbeing of individuals in the country. There is an incidence of family and social unrest, an increase in the crime rate, and other bad practices in society. The situation of unemployment can cause disruption on confidence and self-esteem among people who are unemployed (Alrasheedy, 2019). The situation can drastically deplete the skills, motivation, and well-being of people in the country. The situation of unemployment also causes loss of tax and revenue to the government, development of the country will be slowed and hindered. The expenditure incurred by the government increases as a result of providing support to unemployed people in the country. The situation of a high rate of unemployment will bring about severe problems to individuals, the situation where the unemployment problem takes longer duration, the country resort to borrowing from other countries and becoming indebted to those countries.

Unemployment is a major social issue in many countries in the world, the situation of unemployment is a challenge to the government, employers, and individuals in the society. The types of unemployment can be directed to frictional unemployment, structural unemployment, cyclical unemployment, and seasonal unemployment. The situation of unemployment can be identified when a person is actively seeking a job but does not get any available. This can also include people who are working in jobs that are below their qualifications, experience, and satisfaction. The situation where there is a high level of unemployment will result in several economic distress and problems. The situation of unemployment hinders people to engage in productive work to facilitate development in the country. This will result in a decrease in economic productivity and development.

The two categories of unemployment are voluntary and involuntary unemployment, the situation where one moves out from a job to search for another is known as voluntary unemployment, and a situation where a person is laid off and now looking for a job is known as involuntary unemployment. There are several causes of unemployment, including population growth, slow economic development, people who depend on seasonal jobs such as agriculture production work can become unemployed. A decrease in industrialization and investment can account for unemployment, improper economic planning can also result in unemployment challenges. The situation of unemployment can result in social unrest, an increase in the crime rate, and other bad practices in society. The situation of unemployment can cause disruption on confidence and self-esteem among people who are unemployed. Unemployment can be solved when there is education, development of new jobs, investment, and support of self-employed workers.

Alrasheedy, A. (2019). The cost of unemployment in Saudi Arabia.  International Journal of Economics and Finance, 11 (11), 1-30.

Hauser, M. M., & Burrows, P. (2018).  The Economics of Unemployment Insurance  (1st ed.). London: Routledge.

Hwang, G. J. (2019). How fair are unemployment benefits? The experience of East Asia.  International Social Security Review, 72 (2), pp.49-73.

Sari, A. I. (2019). Social Entrepreneurs and Innovation for the Unemployment.  International Journal of Economics and Management, 1 (3), pp.72-79.

Wolcott, E., Ochse, M. G., Kudlyak, M., & Kouchekinia, N. A. (2020). Temporary Layoffs and Unemployment in the Pandemic.  FRBSF Economic Letter , p.34.

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Essays About Unemployment: Top 6 Examples and 5 Prompts

Read our guide to see helpful essay examples and prompts to further your understanding and write essays about unemployment.

Unemployment is an unfortunate circumstance many find themselves in; it is a challenge that civilized society faces today. When people are unemployed, they look for jobs but cannot get them. As a result, they are left without a source of income and cannot adequately provide for themselves and their families. This, in turn, can lead to various issues, including depression.

Unemployment is a social, economic, and political issue. It leaves many people in poverty and prevents people from obtaining a source of income. As a result, politicians capture the eyes of voters by promising to lower the unemployment rate to get elected. 

You can get started by reading these essay examples if you are writing essays about unemployment.

6 Examples of Essays About Unemployment

1. unemployment reflection by christopher haynes, 2. what i learned from nearly a year of unemployment by becca slaughter, 3. why aren’t europe and canada in the same boat as u.s. for unemployment by glen hendrix, 4. a global dilemma: how unemployment creates poverty by tess hinteregger, 5. why has covid-19 been especially harmful for working women by nicole bateman and martha ross, 6. youth day and ordeal of nigerian youth by utomi jerome-mario, essay prompts about unemployment, 1. unemployment during the covid-19 pandemic, 2. the connection between unemployment and crime, 3. unemployment: whose fault is it, 4. the causes of unemployment, 5. the effects of unemployment.

“In order to secure work, we must be prepared to change or upgrade our skills and be willing to relocate if necessary. But some people are not interested in retraining to find work in another field, some people do not have the confidence to go out and look for work, and some refuse to accept a job they feel is below their level. Unless people like this change their attitudes, they will not be able to find work.”

Haynes provides two perspectives on unemployment; first, that the government should do more to address it, and second, that if people want work, they must adjust to make a living. He believes that many are unemployed because they are unwilling to change their skillset or relocate to get a job. Therefore, more should be done to reduce unemployment, but it goes both ways; everyone must put in the effort.  

“I remember feeling embarrassed and powerless. I was angry it wasn’t my decision. I was happy I didn’t have to go back there, yet I was stressed about not having anywhere to go. Ultimately, I felt an overwhelming sadness that left me terrified. While I was overflowing with confusing and contradicting emotions, I somehow felt empty.”

In her essay, Slaughter reflects on her unemployed time and how it changed her. Her previous job was long and stressful, but whenever someone would ask her what she did for a living, she was embarrassed and regretful for not being there anymore. In addition to losing her job, she feels like she lost a part of herself at that time. Thankfully, she got a new job, one less taxing than her previous one. 

“You would think paying all that money year after year to a government whose purpose is to “establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity” would entitle that person to a modicum of “blessings” to insure his “tranquility” and “general welfare” in case of some stupid virus pandemic. It would certainly be the “just” thing to do. And that person’s “posterity” might look a bit less bleak. European governments and Canada did just that. And it’s not even explicitly stated in the preamble to their constitution.”

Hendrix criticizes the United States’ response to the unemployment problem caused by the COVID-19 pandemic, saying that Canada and European nations have done a much better job. He discusses how much better their unemployment benefit system is compared to the U.S. and how it is ironic that the United States, whose constitution says all of these things promoting justice and wellbeing, cannot provide that for its citizens during a global pandemic. 

“While unemployment can create poverty, poverty also reduces the chance of being employed. To ensure that those who are affected by unemployment do not fall into the negative cycle, researchers believe that governments should focus on improving quality education and training all young people so they remain in school.”

Hinteregger, in her essay, explains the link between unemployment and poverty, writing that it leads to the loss of income. People will also have to raise their families in poverty, which perpetuates the cycle of poverty. In addition, the poor may resort to violence to make a living. She points out the sheer irony of this issue, as unemployment causes poverty while poverty may also reduce the chance of being employed. 

“COVID-19 is hard on women because the U.S. economy is hard on women, and this virus excels at taking existing tensions and ratcheting them up. Millions of women were already supporting themselves and their families on meager wages before coronavirus-mitigation lockdowns sent unemployment rates skyrocketing and millions of jobs disappeared. And working mothers were already shouldering the majority of family caregiving responsibilities in the face of a childcare system that is wholly inadequate for a society in which most parents work outside the home.”

Bateman and Ross write about the effects of the COVID-19 pandemic on women. Many women are forced to go through so much to provide for their families; however, the lockdowns led to many of them losing their jobs. The unemployment rate for women rose dramatically, by 12 percent, from February to April of 2020. It has been difficult for them to balance work with taking care of their families, women’s primary role as dictated by society. 

“Youth unemployment is potentially dangerous as it sends a signal to all segments of the Nigerian Society. Here in Nigeria, the rate of youth unemployment is high, even at the period of economic normalcy i.e. the oil boom of the 1970s (6.2 per cent); 1980s (9.8 per cent) and the 1990s (11.5 per cent). Youth unemployment therefore is not a recent phenomenon. But if what happened in the 1980s/90s were a challenge of sorts, what is happening presently, going by the latest report by the National Bureau of Statistics (NBS), is a challenge.”

Jerome-Mario’s essay focuses on several issues affecting the Nigerian youth, including unemployment. The country has a high unemployment rate; over a fourth of the youth population is unemployed. He stresses the importance of the youth using their voice to make a change and to persuade the government to care for its citizens more. 

The pandemic and its lockdown policies have undoubtedly caused many people to lose jobs. Look into the impact of COVID-19 on the unemployment rate, particularly during the early months of the pandemic. Which sectors were most affected? Pull data and statistics to show how the public was affected by the covid-19 pandemic in terms of unemployment.

Many say that unemployment leads to higher crime rates. Do you believe this is true? Research how unemployment is linked to crime; examine the effects of unemployment on mental health; and conclude whether this may contribute to the increased likelihood of committing a crime. 

In Haynes’ essay, he claims that employers/the government, and workers are to blame for unemployment. After reading his essay and both arguments, who do you believe is at fault? Explain your response in detail, and make sure to provide a solid base of evidence.

Unemployment has many contributing causes. Assuming a non-pandemic setting, research what causes unemployment and list them down in your essay. Elaborate on each one and, if you can draw connections, explain them as well. 

As a grave issue, unemployment has many severe effects, notably poverty. For your essay, write about the effects of unemployment on a person, both physical and mental. How are they connected? What secondary effects might they produce? For a compelling and argumentative essay, answer these questions using research material and interview data.

For help with this topic, read our guide explaining what is persuasive writing ?If you are interested in learning more, check out our essay writing tips !

Martin is an avid writer specializing in editing and proofreading. He also enjoys literary analysis and writing about food and travel.

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Recessions and the Trend in the US Unemployment Rate

• Kurt G. Lunsford

The unemployment rate in the United States falls slowly in expansions, and it may not reach its previous low point before the next recession begins. Based on this feature, I document that the frequent recessions prior to 1983 are associated with an upward trend in the unemployment rate. In contrast, the long expansions beginning in 1983 are associated with a downward trend. I then estimate a two-variable vector autoregression (VAR) that includes the unemployment rate and a recession indicator. Long-horizon forecasts from this VAR conditioned on no future recessions project that the unemployment rate will go to 3.6 percent after a long period with no recessions.

When it comes to analyzing economic indicators to predict where the US economy is headed, the unemployment rate is arguably the variable familiar to most people. It receives attention from academics, policymakers, business economists, and politicians, but also the public at large. An appealing feature of the unemployment rate is its perceived ease of interpretation. A high or rising unemployment rate is a signal of macroeconomic slack or contraction, and a low or falling unemployment rate is a signal of macroeconomic health or expansion.

One issue that can confound this simple interpretation is that the unemployment rate may have a slow-moving trend that changes over time. If the trend is not static, then it is hard to know how far the current or forecasted unemployment rates are from the underlying trend. Figure 1 highlights this issue. It shows the monthly unemployment rate from January 1948 to October 2020 along with a line intended to estimate the unemployment rate trend. I compute this line with the statistical technique in Hodrick and Prescott (1997) (HP). 1  The trend line shows substantial variation, falling below 5 percent in the 1960s and 1990s and rising above 7 percent in the 1980s and 2010s. Because of this changing trend, an unemployment rate of 6 percent may be viewed as indicating macroeconomic slack in some periods but macroeconomic health in other periods, making it difficult for economists, policymakers, and the public at large to know where the economy stands. 2

Notes: Trend computed using a Hodrick and Prescott (1997) filter. Gray bars indicate recession periods. Sources: US Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis ( https://fred.stlouisfed.org/series/UNRATE ), and author’s calculations.

Researchers and policymakers often acknowledge the trend in the unemployment rate. Researchers typically remove a time-varying trend from the unemployment rate before studying its business cycle properties. 3  Policymakers on the Federal Reserve’s Federal Open Market Committee (FOMC) note in their Statement on Longer-Run Goals and Monetary Policy Strategy that the maximum level of employment “changes over time.” 4  In fact, the longer-run projections of the unemployment rate in the FOMC’s Summary of Economic Projections have drifted down since 2012. 5

Research has attributed much of the trend in the unemployment rate to demographic changes. 6  In this Commentary , I suggest an additional, previously unrecognized source of the trend: the frequency of recessions. Because the unemployment rate rises quickly in recessions but falls slowly in expansions, it may not fall to its previous low point if a recession cuts an expansion short. 7  Hence, frequent recessions can cause the unemployment rate to trend up over time. Figure 1 shows that this happened in the 1950s and the 1970s. Since 1983, recessions have been less frequent and expansions have been longer, causing the unemployment rate to regularly fall below its previous low point and generating a downward trend in the unemployment rate. 8  In February 2020, the unemployment rate fell to 3.5 percent, its lowest level since 1969.

I also estimate the relationship between recessions and the unemployment rate with a statistical model called a vector autoregression (VAR). I use the VAR to make forecasts of the unemployment rate under the hypothetical scenario that there will be no recessions in the future. I intend for this hypothetical scenario to match the spirit of the FOMC’s longer-run projections of the unemployment rate, which are made “in the absence of further shocks to the economy.” 9  My forecasts project that the unemployment rate will go to 3.6 percent after a long period with no recessions.

Recessions and Unemployment Rate Trends

Figure 2 depicts a series of computations that result in a view of the alignment between recessions and the unemployment rate. This view of the alignment (panel D) highlights the intuition that frequent recessions, separated by short expansions, are associated with upward drift in the unemployment rate, while infrequent recessions, separated by long expansions, are associated with downward drift.

Note: Gray bars indicate recession periods. Sources: US Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis ( https://fred.stlouisfed.org/series/UNRATE ), NBER-based Recession Indicators for the United States from the Period following the Peak through the Trough [USREC], retrieved from FRED, Federal Reserve Bank of St. Louis ( https://fred.stlouisfed.org/series/USREC ), and author’s calculations.

Panel A of figure 2 shows the cumulative sum of the National Bureau of Economic Research’s (NBER’s) recession months from January 1948 to October 2020. I define a recession as starting in the month following the NBER peak and ending in the month of an NBER trough. For the current period, the NBER announced a business cycle peak in February 2020 but has not announced a subsequent trough. In figure 2, I treat March and April 2020 as recession months. 10

In panel B of figure 2, I fit a linear time trend to the cumulative sum of the NBER recession months with ordinary least squares. This time trend gives an estimate of how quickly recessions accumulate on average. Then in panel C, I remove the linear time trend from the cumulative sum and show a detrended cumulative sum of NBER recession months. This detrended cumulative sum shows when recessions have accumulated more quickly and less quickly than average.

The detrended cumulative sum in panel C rises at a constant rate in every recessionary month and falls at a constant but slower rate in every expansionary month. This structure implies that this variable may not fall to its previous low point if a recession cuts an expansion short. As a result, frequent recessions, separated by short expansions, can cause this detrended cumulative sum to drift up over time. This upward drift occurs with the four recessions that begin in 1948, 1953, 1957, and 1960 and again with the four recessions that begin in 1970, 1973, 1980, and 1981. In other words, both 1948 to 1960 and 1970 to 1982 are 13-year periods where recessions accumulated more quickly than average. In contrast, recessions accumulated less quickly than average during the long expansions that occur mostly since 1983 and also in the 1960s. During these periods, the detrended cumulative sum falls below its low point from previous expansions, creating downward drifts in the series.

The periods of rapid recession accumulation, 1948 to 1960 and 1970 to 1982, are also periods when the unemployment rate trend rises in figure 1. In contrast, periods when recessions accumulate less quickly than average, the 1960s, 1983 to 2000, and the 2010s, are all periods when the unemployment rate trend falls in figure 1. To make this comparison between the accumulation of recessionary months and the unemployment rate more explicit, panel D shows the detrended cumulative sum of NBER recession months (left axis) along with the unemployment rate (right axis). The two series move closely together and have a correlation of about 0.7, even including the unusually large spike in the unemployment rate in April 2020.

A positive correlation between the frequency of recessionary months and the unemployment rate is not surprising. The NBER’s Business Cycle Dating Committee uses labor market variables when assigning business cycle peaks and troughs. 11  However, what is surprising about panel D is how closely the unemployment rate follows the detrended cumulative sum of recessionary months for such a long time—from 1948 to 2020. 12  This is surprising because the US labor market has been driven by a variety of economic shocks along with changing government policies, labor market regulations, and demographics; yet, the unemployment rate closely tracks the stable and linear structure of the detrended cumulative sum of recessionary months. As with the detrended cumulative sum of recessionary months, the unemployment rate rises quickly in recessions but falls slowly in expansions, and these features cause the unemployment rate to trend up with frequent recessions and trend down with infrequent recessions.

Longer-Run Unemployment Rate Projections

The results in the previous section show that the unemployment rate trend is aligned closely with how quickly recessionary months accumulate. Consequently, the unemployment rate trend may not be easily separated from the business cycle with statistical techniques that estimate slow-moving trends, such as in Hodrick and Prescott (1997), to offer just one example. This is because the unemployment rate’s trend is itself related to business cycles. 13  Instead, I model the unemployment rate and the NBER recession indicator, which has a value of zero in expansion months and a value of one in recession months, together with a statistical tool known as a VAR.

Using this VAR, I can produce longer-run projections of the unemployment rate in the spirit of the FOMC’s Summary of Economic Projections, which assumes that there will be no shocks to the economy in the future. I do this by producing forecasts of the unemployment rate while imposing that the recession indicator has a value of zero in all future periods. 14

There are two important steps for computing the forecasts. First, I use data from January 1948 to February 2020 to estimate the parameters of the VAR. These parameters establish the statistical relationship between the unemployment rate and the recession indicator, allowing me to predict how the unemployment rate will move in the future under the hypothetical scenario of no future recessions. Second, I choose the initial conditions as a starting point for my forecasts. 15  For example, I need to decide if I want to start my forecasts from a high unemployment rate or a low unemployment rate. Forecasters often use the most recent data as their starting points. However, they may also choose older data to check how accurate their projections would have been in the past.

Figure 3 uses this latter approach. Each panel shows the unemployment rate for the 7 most recent NBER expansions. 16  In addition, it shows the forecasts from the VAR under the hypothetical scenario of no recessions. I use the months before each expansion started as the starting point for the forecasts.

Note: Forecasts are computed under the hypothetical scenario of no future recessions. Sources: US Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis ( https://fred.stlouisfed.org/series/UNRATE ), and author’s calculations.

While these forecasts do not perfectly track the unemployment rate over the course of an expansion, they generally match the downward trend of the unemployment rate in expansions. These forecasts also demonstrate relative accuracy in predicting where the unemployment rate will fall at the end of expansions. For the long expansion from 1991 to early 2001, the forecast predicts almost perfectly where the unemployment rate fell. For the other two longest expansions—1961 through 1969 and 2009 to early 2020—the forecast overpredicts where the unemployment rate fell to by about 0.6 percentage points.

The longest expansion shown in figure 3 (panel G)—July 2009 to February 2020—lasted 10 years and 8 months. In order to compute unemployment rate forecasts in the spirit of the FOMC’s Summary of Economic Projections, which assumes that there will be no shocks to the economy in the future, I next consider how low the unemployment rate could fall in expansions that last much longer than 10 years and 8 months. Specifically, I produce forecasts by imposing no recessions for 20 years. 17  In addition, I study the importance of the starting points for the forecasts by considering three different starting points. The first two are November 1982 and June 2009. These are the same starting points that I used in panels D and G of figure 3 and they coincide with the ends of the deepest recessions since 1948. The third starting point is February 2020, which is the last month in my estimation sample.

Figure 4 shows the 20-year forecasts. When using the November 1982 and June 2009 starting points, the forecasts start with the unemployment rate at high levels. This is natural as both of these starting points coincide with the end of recessions. In contrast, the forecasts generated with the February 2020 starting point start with a low level of the unemployment rate, a measure which is consistent with the healthy labor market at the start of 2020.

Note: The three lines correspond to three starting points: November 1982, June 2009, and December 2019. Source: Author’s calculations.

The forecasts generated with the November 1982 and June 2009 starting points move down over time. The forecasts generated from the February 2020 starting point rise very slightly before falling again. The forecasts with all three initial conditions become very similar at about 20 years, showing that the starting point does not affect how low the VAR projects the unemployment rate will fall as long as expansions are sufficiently long. For each of the three starting points, the VAR projects that the unemployment rate will be about 3.6 percent after 20 years without a recession. 18  That is, if one were to use this VAR to make a longer-run projection of the unemployment rate in the absence of further shocks to the economy as done in the FOMC’s Summary of Economic Projections, then one would project 3.6 percent. 19

The value of the projections in figure 4 is that they provide an answer to where the unemployment rate could fall in a hypothetical world in which recessions do not occur, which I approximate with 20-year forecasts with no recessions. Of course, other choices of forecast length are possible. With shorter forecasts, the starting point of the forecast still matters. As shown in figure 4, the forecasts generated with the November 1982 and June 2009 starting points are not all the way down to 3.6 percent until about 20 years. I have also considered longer forecasts; however, I do not show these forecasts here because they also yield unemployment rates at 3.6 percent.

To check the robustness of my results, I drop early portions of my estimation sample and recompute the long-run forecasts under the assumption of no future recessions. Using samples of January 1958 to February 2020, January 1968 to February 2020, and January 1978 to February 2020, I compute the long-run forecasts of the unemployment rate to be 3.6 percent, 3.8 percent, and 3.6 percent, respectively. These values indicate that the early portions of my sample do not have a big impact on the results. Alternatively, if I use January 1948 to June 2009 as my sample, the long-run forecast is 3.9 percent. This sample choice shows that the 2010s, which were part of the longest expansion in US history, have only a small impact on the results. Overall, the findings suggest that how low the unemployment rate can fall in an expansion appears to be quite stable over a variety of sample periods.

Finally, to highlight how the assumption of no future recessions affects the forecast of the unemployment rate, I also compute the 20-year forecast of the unemployment rate without this assumption. This unconditional forecast of the unemployment rate is 5.7 percent, more than 2 percentage points above the forecast that assumes no future recessions. Clearly, when making longer-run projections of the unemployment rate, such as those in the FOMC’s Summary of Economic Projections, conditioning upon future recessions can make large changes in the projection.

Conclusions

The unemployment rate in the United States falls slowly in expansions, and it may not reach its previous low point before the next recession begins. This feature suggests that the unemployment rate trends up with frequent recessions and trends down when recessions are infrequent. In this Commentary , I show that the US unemployment rate indeed trended up with the rapid accumulation of recessions prior to 1983 and then trended down again with the slow accumulation of recessions after 1983. In addition, I estimate the relationship between recessions and the unemployment rate with a VAR. Long-run forecasts from this VAR under the scenario of no future recessions can be used to produce longer-run projections of the unemployment rate in the spirit of the FOMC’s Summary of Economic Projections. I find that the unemployment rate moves to 3.6 percent in the absence of future recessions. 

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit clevelandfed.org  for updates.

• I use a tuning parameter of 106 for the Hodrick and Prescott (1997) filter. This parameter is higher than what academic researchers often use for monthly data. I choose this higher value to highlight the lower frequency variation in the data. Using the filter from Müller and Watson (2015) with frequencies of 12 years or longer produces a similar picture. Return to 1
• For example, Weiner (1993) argues that the natural rate of unemployment was about 6.25 percent in 1993 but about 6.7 percent in 1980. An important point is that Weiner (1993) accounts for inflation in his estimate of the natural rate of unemployment. However, the HP filter in figure 1 does not account for inflation, nor do I throughout this Commentary . Return to 2
• For example, see the handbook chapter of Rogerson and Shimer (2011), which like many other studies, uses the Hodrick and Prescott (1997) filter to separate the trend and cycle components of the unemployment rate. Return to 3
• See https://www.federalreserve.gov/monetarypolicy/files/FOMC_LongerRunGoals.pdf . Return to 4
• For the April 2012 FOMC meeting, the range of longer-run unemployment rate projections was 4.9 percent to 6.0 percent. For the September 2020 FOMC meeting, this longer-run unemployment rate range had fallen to 3.5 percent to 4.7 percent. Return to 5
• Weiner (1993), also discussed in footnote 2, emphasizes demographic change. See Crump, Eusepi, Giannoni, and Șahin (2019) for more recent analysis and discussion of demographics and the unemployment rate. Return to 6
• Neftçi (1984) and Sichel (1993) have previously documented that the unemployment rate changes asymmetrically over the business cycle, rising quickly in recessions and falling slowly in expansions. This Commentary draws out the implication that this asymmetry can affect the longer-run trend in the unemployment rate. Return to 7
• Consistent with the slower accumulation of recession months, 1983 roughly corresponds to beginning of the “Great Moderation,” a period in US history in which many economic variables became less volatile (Kim and Nelson, 1999; McConnell and Perez-Quirós, 2000; Stock and Watson, 2002). The results in this Commentary link the Great Moderation to theoretical models of unemployment rate asymmetry, such as Dupraz, Nakamura, and Steinsson (2019) and Lepetit (2020), who find that more stable economic environments imply lower average unemployment rates. That is, the general downward trend in the unemployment rate after 1983 is consistent with theoretical models that show that the average unemployment rate can fall with a reduction in economic volatility. Return to 8
• See the notes to table 1 of https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20200916.pdf . Return to 9
• See https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions for a list NBER peaks and troughs. Return to 10
• The NBER’s Business Cycle Dating Committee also uses gross domestic product, gross domestic income, personal consumption expenditures, and personal income less transfers when assigning business cycle peaks and troughs. For an example of the Business Cycle Dating Committee’s reasoning, see https://www.nber.org/news/business-cycle-dating-committee-announcement-june-8-2020 . Return to 11
• Consistent with this finding, Hall and Kudlyak (2020) document that the pace of reduction of the unemployment rate in expansions has been roughly stable for 70 years. Additionally, figure 2 implies that the pace of unemployment rate increases in recessions has also been roughly stable for 70 years. Return to 12
• Separating trends and business cycles is challenging for a wide variety of economic indicators. For example, Coibion, Gorodnichenko, and Ulate (2018) show that the Congressional Budget Office has historically made large changes to its measure of potential output around recessions. Return to 13
• I use the conditional forecasting approach in Doan, Litterman, and Sims (1983). I provide details of the VAR and the conditional forecasting exercise in a supplemental appendix. Return to 14
• Mathematically, these initial conditions are the values of the right-hand side variables in the VAR that are needed to produce the forecasts. See the supplemental appendix for additional details. Return to 15
• I exclude the expansion that began in August 1980 because this expansion lasted only one year. Return to 16
• I choose 20 years because that is the horizon at which forecasts appear to converge for all of the initial conditions in figure 4. If I only use a 15-year forecast horizon, the November 1982 and June 2009 initial conditions yield forecasts of the unemployment that fall to 3.8 percent, but it does not fall all the way to 3.6 percent as shown in figure 4. If I use horizons of 25 or 30 years, then the unemployment rate falls to 3.6 percent for all the initial conditions shown in figure 4, but it does not fall further. Return to 17
• This finding uses a VAR with 6 lags and is sensitive to the number of lags included in the VAR. I have checked lag lengths from 1 to 13 and found that the 20-year unemployment rate projection varies from a low of about 2.9 percent (with 13 lags) to a high of about 3.7 percent (with 1 lag). Hence, the results that I provide are conservative in the sense that different lag choices may yield materially lower unemployment rate projections, but none yields materially higher unemployment rate projections. Return to 18
• This long-run projection of 3.6 percent is very similar to Hall and Kudlyak’s (2020) steady-state unemployment rate of 3.5 percent. Hence, my results provide empirical support for Hall and Kudlyak’s choice of a steady state. In contrast, my long-run projection is materially above the steady-state of Dupraz, Nakamura, and Steinsson (2019), which is 4.6 percent. In addition, the conditional forecasts that I produce can provide data moments that may help researchers estimate labor market congestion functions as in Section 5.3 of Hall and Kudlyak (2020). Return to 19
• Coibion, Olivier, Yuriy Gorodnichenko, and Mauricio Ulate. 2018. “The Cyclical Sensitivity in Estimates of Potential Output.” Brookings Papers on Economic Activity , Fall: 343–411. https://www.doi.org/10.1353/eca.2018.0020 .
• Crump, Richard K., Stefano Eusepi, Marc Giannoni, and Ayşegül Șahin. 2019. “A Unified Approach to Measuring u*.” Brookings Papers on Economic Activity , Spring: 143–214. https://www.doi.org/10.1353/eca.2019.0002 .
• Doan, Thomas, Robert Litterman, and Christopher A. Sims. 1983. “Forecasting and Conditional Projection Using Realistic Prior Distributions.” NBER Working Paper, No. 1202. https://www.doi.org/10.3386/w1202 .
• Dupraz, Stéphane, Emi Nakamura, and Jón Steinsson. 2019. “A Plucking Model of Business Cycles.” NBER Working Paper, No. 26351. https://www.doi.org/10.3386/w26351 .
• Hall, Robert E., and Marianna Kudlyak. 2020. “Why Has the US Economy Recovered So Consistently from Every Recession in the Past 70 Years?” NBER Working Paper No. 27234. https://www.doi.org/10.3386/w27234 .
• Hodrick, Robert J., and Edward C. Prescott. 1997. “Postwar US Business Cycles: An Empirical Investigation.” Journal of Money, Credit, and Banking , 29(1): 1–16. https://www.doi.org/10.2307/2953682 .
• Kim, Chang-Jin, and Charles R. Nelson. 1999. “Has the US Economy Become More Stable? A Bayesian Approach Based on a Markov
• Switching Model of the Business Cycle.” Review of Economics and Statistics , 81(4): 608–616. https://www.doi.org/10.1162/003465399558472 .
• Lepetit, Antoine, 2020. “Asymmetric Unemployment Fluctuations and Monetary Policy Trade-Offs.” Review of Economic Dynamic s, 36: 29–45. https://doi.org/10.1016/j.red.2019.07.005 .
• McConnell, Margaret M., and Gabriel Perez-Quirós. 2000. “Output Fluctuations in the United States: What Has Changed since the Early 1980s?” American Economic Review , 90(5): 1464–1476. https://doi.org/10.1257/aer.90.5.1464 .
• Müller, Ulrich K. and Mark W. Watson, 2015. “Low-Frequency Econometrics.” NBER Working Paper, No. 21564. https://www.doi.org/10.3386/w21564 .
• Neftçi, Salih N. 1984. “Are Economic Time Series Asymmetric over the Business Cycle?” Journal of Political Economy , 92(2): 307–328. https://www.doi.org/10.1086/261226 .
• Rogerson, Richard, and Robert Shimer. 2011. “Search in Macroeconomic Models of the Labor Market.” Handbook of Labor Economics , Volume 4a, Chapter 7, 619-700. https://www.doi.org/10.1016/S0169-7218(11)00413-8 .
• Sichel, Daniel E. 1993. “Business Cycle Asymmetry: A Deeper Look.” Economic Inquiry , 31(2): 224–236. https://www.doi.org/10.1111/j.1465-7295.1993.tb00879.x .
• Stock, James H., and Mark W. Watson. 2002. “Has the Business Cycle Changed and Why?” NBER Macroeconomics Annual , 17: 159–218. https://www.doi.org/10.1086/ma.17.3585284 .
• Weiner, Stuart E. 1993. “New Estimates of the Natural Rate of Unemployment.” Federal Reserve Bank of Kansas City, Economic Review , Fourth Quarter: 53–63. https://ideas.repec.org/a/fip/fedker/y1993iqivp53-69nv.78no.4.html .

Suggested Citation

Lunsford, Kurt G. 2021. “Recessions and the Trend in the US Unemployment Rate.” Federal Reserve Bank of Cleveland,  Economic Commentary  2021-01. https://doi.org/10.26509/frbc-ec-202101

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Essay on Unemployment: 100 to 300 Words

• Updated on  
• Mar 30, 2024

Writing an essay on unemployment provides an opportunity to explore a critical issue affecting societies worldwide. Unemployment, a multifaceted problem, has far-reaching consequences that touch upon various aspects of individuals, families, and nations. In this essay, we will delve into the complexities of unemployment, examine its causes and consequences, discuss government initiatives, and shed light on potential solutions.

Table of Contents

• 1 What is Unemployment?
• 2 Essay on Unemployment in 100 words
• 3 Essay on Unemployment in 200 words
• 4 Essay on Unemployment in 300 words
• 5 Tips to Ace in Writing An Essay

Must Read: The Beginner’s Guide to Writing an Essay

What is Unemployment?

Lack of jobs leads to unemployment. It is a very serious economic and social concern that is happening all around the globe leading to many social ills. This issue is a major one and hence many governments are trying to address it. When people of a nation are employed, that leads to the economic and social well-being of that nation. To address it, the education system needs to be modeled differently so as to increase the employability of people. In democracies, political parties use unemployment as a core issue in their election manifestos.

Essay on Unemployment in 100 words

Unemployment refers to the condition when individuals, capable and willing to work, are unable to secure gainful employment. It is a pervasive issue across the globe, with varying degrees of impact on societies. Unemployment results in financial instability, and emotional distress, and hampers individual growth. Governments and organizations must collaborate to create opportunities for employment through skill development and policy implementation.

Essay on Unemployment in 200 words

Unemployment, a pressing concern globally, stems from multiple factors that hinder the workforce’s engagement in productive activities. It affects both developed and developing nations, contributing to economic imbalances and social disparities. The consequences of unemployment include reduced income levels, increased poverty rates, and strained government resources. Moreover, the psychological toll it takes on individuals and families can be severe, leading to stress, depression, and strained relationships.

Essay on Unemployment in 300 words

The intricate web of unemployment is spun from a mix of causes, ranging from economic fluctuations to structural shifts in industries. Cyclical unemployment, driven by economic downturns, and structural unemployment, resulting from a mismatch between skills and job openings, are widespread forms. Additionally, technological advancements lead to technological unemployment as machines replace human labour.

Unemployment has cascading effects on societies. Diminished purchasing power affects market demand, thereby impacting economic growth. As unemployment rates rise, so does the burden on social welfare programs and the healthcare system. The phenomenon also fuels social unrest and political instability, making it a challenge governments cannot ignore.

Governments worldwide have initiated strategies to tackle unemployment. Skill development programs, vocational training, and entrepreneurship initiatives are designed to equip individuals with market-relevant skills. Furthermore, promoting labour-intensive industries and investing in sectors with growth potential can generate employment opportunities.

In conclusion, unemployment is a complex issue that necessitates a multi-pronged approach. Governments, industries, and individuals must collaborate to alleviate its impact. Effective policy implementation, education reforms, and the cultivation of entrepreneurial spirit can pave the way towards reducing unemployment rates and fostering a more stable and prosperous society.

Tips to Ace in Writing An Essay

Before we dive into the specifics of unemployment, let’s briefly discuss some tips to enhance your essay-writing skills:

• Understand the Prompt: Ensure a clear understanding of the essay prompt to address all its components effectively.
• Research Thoroughly: Gather relevant information from credible sources to build a comprehensive and informed essay.
• Organize Your Thoughts: Create an outline to structure your essay logically, allowing your ideas to flow coherently.
• Introduction and Conclusion: Craft a compelling introduction to engage your readers, and a succinct conclusion to summarize your key points.
• Use Clear Language: Express your ideas using clear and concise language, avoiding jargon or overly complex vocabulary.
• Provide Examples: Illustrate your points with real-life examples to enhance understanding and credibility.
• Edit and Proofread: Revise your essay for grammar, punctuation, and coherence to ensure a polished final draft.

Also Read: Unemployment v/s Underemployment – What’s Worse?

Related Reads:-     

Unemployment refers to the state in which individuals who are willing and able to work are without gainful employment opportunities. It is a condition where individuals seek jobs but are unable to secure them, leading to financial instability and societal challenges.

Unemployment, as discussed in the essay, is a multifaceted issue encompassing the lack of employment opportunities for willing and capable individuals. It explores various forms of unemployment, its causes, far-reaching consequences on economies and societies, and the role of governments in implementing solutions to mitigate its impact.

Unemployment is the term used to describe the situation where individuals of working age are actively seeking employment but are unable to find suitable job opportunities. It signifies a gap between the available workforce and available jobs, often leading to economic and social challenges within a society.

Unemployment emerges as a prominent thread, influencing economic, social, and psychological realms. As we’ve explored in this essay, comprehending the causes and consequences of unemployment is pivotal in devising solutions. Governments, institutions, and individuals must strive collectively to unravel this issue’s complexities and weave a fabric of employment opportunities, stability, and progress. We hope that this essay blog on Unemployment helps. For more amazing daily reads related to essay writing , stay tuned with Leverage Edu .

Manasvi Kotwal

Manasvi's flair in writing abilities is derived from her past experience of working with bootstrap start-ups, Advertisement and PR agencies as well as freelancing. She's currently working as a Content Marketing Associate at Leverage Edu to be a part of its thriving ecosystem.

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Why the Unemployment Rate Matters

Compiling labor statistics, employment vs. unemployment, measures of unemployment, the u-6 measure, the unemployment test, the bottom line.

• Macroeconomics

How the Unemployment Rate Affects Everybody

The national unemployment rate is defined as the percentage of unemployed workers in the total labor force. It is widely recognized as a key indicator of the performance of a country's labor market.

As a closely watched economic indicator, the unemployment rate attracts a lot of media attention, especially during recessions and challenging economic times. This is because the unemployment rate doesn't just impact those individuals who are jobless; the level and persistence of the factors of unemployment have wide-ranging impacts across the broader economy.

Key Takeaways

• The unemployment rate is the proportion of unemployed persons in the labor force.
• Unemployment adversely affects the disposable income of families, erodes purchasing power, diminishes employee morale, and reduces an economy's output.
• The Current Population Survey (CPS) evaluates the extent of unemployment in the U.S., with measures ranging from the U-1 measure, the most strict, to the U-6 measure, the most inclusive measure of labor underutilization.
• The official measure of unemployment in the US is currently the U-3 measure, which defines the unemployed as those who do not have a job, those who have actively searched for work in the prior four weeks, and those who are available for work.

According to the U.S. Bureau of Labor Statistics (BLS) , when workers are unemployed, their families lose wages, and the nation as a whole loses its contribution to the economy in terms of the goods or services that could have been produced.

Unemployed workers also lose their purchasing power , which can lead to unemployment for other workers, creating a cascading effect that ripples through the economy. In this way, unemployment even impacts those who are still employed.

When companies are trying to cut costs, they often reduce their workforce as one of their cost-saving measures. Those workers who are left to do more work after a company lays off part of their staff are not likely to receive any additional compensation for the extra hours they are working.

Unemployment can also have a negative effect on the mental state of those who are still employed. They may become more concerned about losing their jobs or be hesitant to search for other employment because they have a false belief that they "are lucky" to be employed at all. They may even feel guilty about having a job when their co-workers are out of work. 

More broadly, high unemployment is also problematic for the U.S. economy. Approximately 70% of GDP is made up of consumer spending. Unemployed workers consume far less than those with a steady income because they have less discretionary income.

In order to understand the causes and the remedy for high levels of unemployment, policymakers seek information on different aspects of unemployment. Statistics about the number of unemployed people, the period for which they have been unemployed, their skill levels, the trend in unemployment, and regional disparities in unemployment are periodically made available for policymakers so that they can interpret them and hopefully make better-informed decisions about steering the economy and countering unemployment.

One misconception about the unemployment rate is that it is derived from the number of people filing claims for unemployment insurance (UI) benefits. But the number of UI claimants does not provide accurate information on the extent of unemployment. This is because people may still be jobless after their benefits run out, while other applicants for UI benefits may not be eligible for benefits or may not even have applied for them.

Tracking every unemployed person monthly would also be very expensive, time-consuming, and impractical. Therefore, the U.S. government conducts a sample survey—the Current Population Survey (CPS) —to measure the extent of unemployment in the nation.

The U.S. has conducted the CPS monthly since 1940. About 60,000 households, or approximately 110,000 individuals, are in the CPS sample survey, selected to be representative of the entire U.S. population. A typical household included in the sample survey is interviewed monthly for four consecutive months and then again for the same four calendar months a year later.

The survey is carried out by trained and experienced Census Bureau employees. They interview persons in the 60,000 sample households for information on both the labor force activities or non-labor force status of all of their household members during the survey reference period (generally the week that includes the 12th of the month).

When a sample survey is used, there is a chance that the sample estimates may differ from the actual population values. According to the BLS, there is a 90% chance that the monthly unemployment estimate change from the sample is within +/- 110,000 of the figure obtainable from a total census of the entire population.

The basic definitions used by the BLS in compiling labor statistics are quite straightforward:

• People with jobs are employed.
• People who are jobless, looking for jobs, and available for work are unemployed.
• People who are neither employed nor unemployed are not in the labor force.

The sum of employed and unemployed people makes up the labor force . The remainder consists of people who have no jobs and are not looking for any. These typically include students, retirees, and homemakers.

It's important to note that labor force measures, such as the unemployment rate, are based on the civilian non-institutional U.S. population ages 16 and older. Labor force measures exclude persons who are below the age of 16, people confined to institutions, such as nursing homes and prisons, and all personnel on active duty in the Armed Forces.

While the basic tenets that determine whether or not an individual is employed are simple, there are numerous situations that can make it difficult to ascertain the correct category to which a person belongs.

People are considered employed if they did any work for pay or profit during the survey week. People are also counted as employed if they have a job at which they did not work during the survey week, for reasons such as being on vacation, falling ill, doing some personal work, etc.

People are classified as unemployed if they fulfill the following three criteria:

• Do not have a job
• Have actively looked for work in the prior four weeks
• Are currently available for work

The official unemployment rate that is widely quoted in the media and other news sources in the U.S. is based on the above definition of unemployment.

The criteria for being considered unemployed are rigorous and well-defined. For example, actively looking for work includes measures such as contacting prospective employers, attending job interviews, visiting an employment agency, sending out resumes, and responding to job advertisements. Therefore, this excludes passive methods of job search, such as attending a training course or scanning job advertisements in newspapers.

As such, the total unemployment figure includes people who have lost their jobs, as well as persons who have left their jobs to look for other employment, temporary workers whose jobs have ended, individuals looking for their first jobs, and experienced workers returning to the labor force.

Inflation and unemployment generally have an inverse relationship. When inflation rises, unemployment typically drops.

The official unemployment rate has often been cited as being too restrictive and not representative of the true breadth of labor market problems. Some analysts contend that the official unemployment measure is too broad and would like a more narrowly targeted measure; however, they are the minority. This group is outnumbered by those who believe the unemployment rate is too narrowly defined.

In 1976, the BLS, under the direction of Commissioner Julius Shiskin, introduced a range of labor market measures, entitled U-1 through U-7. In 1995, following the redesign of the CPS in the previous year, the BLS introduced a new range of alternative measures of labor underutilization. Regular publication of these measures commenced with the Feb. 1996 Employment Situation report .

The measures range from U-1, which is the most restrictive since it only includes those people who were jobless for at least 15 weeks, to U-6, the broadest definition of labor underutilization. The U-3 measure is the official unemployment rate. Measure U-1 and Measure U-2 are more restrictive and therefore lower than U-3, while U-4, U-5, and U-6 are higher than U-3.

The U-6 measure provides the broadest measure of labor underutilization. The BLS defines it as the "total unemployed, plus all persons marginally attached to the labor force, plus total employed part-time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force."

Marginally attached workers are defined as persons without jobs who are not currently looking for work (and hence not considered unemployed), but who have demonstrated some degree of labor force attachment. To be included in this category, individuals must indicate they currently want a job, have looked for work in the last 12 months, and are available for work.

One subset of the marginally attached group is called discouraged workers . Discouraged workers are those who are not currently looking for work for these reasons:

• They believe no job is available in their line of work
• They have been unable to find work
• They lack the necessary schooling, skills, or experience
• They face some form of discrimination from employers (for example, being too young or too old)

The U-6 measure is sometimes referred to as the "real" unemployment rate. Proponents of this measure claim that it represents the true nature of the unemployment problem because it also includes:

• People without jobs
• Those who would like to work but have not actively sought jobs in the past four weeks due to issues such as child care, family obligations, or other temporary problems
• Discouraged workers who have stopped looking for work because they think it is futile
• Underemployed people, which include those who are employed but are working fewer hours than they would like

Consider the following hypothetical cases as examples of how the official unemployment rate (U-3) understates the magnitude of the labor underutilization problem:

• A single mother who has been unemployed for three months but was unavailable for work for the past two weeks to care for her sick child would be classified as "not in the labor force." She would be excluded from the U-3 measure but would be included in the U-6 measure.
• A 60-year-old former executive who lost their job in a corporate restructuring a year ago is keen to return to the workforce; however, after sending out more than 100 resumes in the first three months of unemployment, they are discouraged because they have not received an interview call or acknowledgment letter; as a result, they stopped their job-hunting efforts. They would be excluded from the U-3 measure but would be included in the U-6 measure.
• A sales executive with a family to support and bills to pay has been unable to find full-time work after six months of unemployment. They finally take up a three-month contract that entails only six hours of work a week. While the U-3 measure would consider them employed, the U-6 measure would consider their obvious degree of underemployment.

What Is the Unemployment Rate?

The unemployment rate is the current portion of the labor force that is without work. The Bureau of Labor Statistics maintains historical unemployment data going back to 1948. The unemployment rate in the U.S. as of July 2023 is 3.5%.

What Is the Highest Unemployment Rate?

South Africa has the highest unemployment rate in the world, with unemployment at 33.5% as of 2022. Estimates for 2023 also place it in the first position, with an estimated unemployment rate of 34.7%.

How to Reduce Unemployment?

There are many theories on how to reduce unemployment. Implementing an expansionary monetary policy, which reduces interest rates, making goods and services cheaper, increases demand, which causes businesses to increase production, which requires them to hire more people, is one strategy. Other methods can include expanding apprenticeship programs, providing businesses with tax credits or incentives to increase hiring, providing more assistance to the self-employed, and improving education.

While alternative measures of unemployment, such as the U-6 measure, show very similar movements throughout the business cycle , they differ significantly in magnitude from the official unemployment rate. The strict definition of unemployment under the official U-3 measure may result in understating the magnitude of the actual unemployment situation.

It is thus advisable to look beyond the headline U-3 unemployment number as it may not convey the whole story. The U-6 measure, by being the least restrictive and therefore the highest unemployment rate, may provide a truer picture of the degree of labor underutilization.

U.S. Bureau of Labor Statistics. " How the Government Measures Unemployment ."

Bureau of Labor Statistics. " How the Government Measures Unemployment ."

The White House. " The Advance Estimate for Second Quarter GDP ."

Bureau of Labor Statistics. " Labor Force Statistics from the Current Population Survey ."

Census Bureau. " Collecting Data ."

Bureau of Labor Statistics. " Employment Situation Technical Note ."

Bureau of Labor Statistics. " Concepts and Definitions ."

Bureau of Labor Statistics. " The Unemployment Rate and Beyond: Alternative Measures of Labor Underutilization ," Page 2.

Bureau of Labor Statistics. " The CPS After the Redesign: Refocusing the Economic Lens ," Page 2.

Bureau of Labor Statistics. " Table A-15. Alternative Measures of Labor Underutilization ."

Bureau of Labor Statistics. " The Employment Situation ."

The Global Economy. " Unemployment Rate Forecast - Country Rankings ."

• What Is Unemployment? Causes, Types, and Measurement 1 of 43
• What Does Termination of Employment Mean? 2 of 43
• What Is an Unemployment Claim? 3 of 43
• Unemployment Compensation: Definition, Requirements, and Example 4 of 43
• What Is Severance Pay? Definition and Why It's Offered 5 of 43
• The Layoff Payoff: A Severance Package 6 of 43
• 7 Considerations When You Negotiate Severance 7 of 43
• 7 Effective Ways to Prepare for a Layoff 8 of 43
• Unemployment Insurance (UI): How It Works, Requirements, and Funding 9 of 43
• How to Apply for Unemployment Insurance Now 10 of 43
• Who Doesn't Get Unemployment Insurance? 11 of 43
• What Was Private Unemployment Insurance? 12 of 43
• How to Pay Your Bills When You Lose Your Job 13 of 43
• Can I Access Money in My 401(k) If I Am Unemployed? 14 of 43
• All About COBRA Health Insurance 15 of 43
• Medical Debt: What to Do When You Can’t Pay 16 of 43
• Help, My Unemployment Benefits Are Running Out 17 of 43
• What Is the Unemployment Rate? Rates by State 18 of 43
• How Is the U.S. Monthly Unemployment Rate Calculated? 19 of 43
• Unemployment Rates: The Highest and Lowest Worldwide 20 of 43
• What You Need to Know About the Employment Report 21 of 43
• U-3 vs. U-6 Unemployment Rate: What's the Difference? 22 of 43
• Participation Rate vs. Unemployment Rate: What's the Difference? 23 of 43
• What the Unemployment Rate Does Not Tell Us 24 of 43
• How the Unemployment Rate Affects Everybody 25 of 43
• How Inflation and Unemployment Are Related 26 of 43
• How the Minimum Wage Impacts Unemployment 27 of 43
• The Cost of Unemployment to the Economy 28 of 43
• Okun’s Law: Economic Growth and Unemployment 29 of 43
• What Can Policymakers Do To Decrease Cyclical Unemployment? 30 of 43
• What Happens When Inflation and Unemployment Are Positively Correlated? 31 of 43
• The Downside of Low Unemployment 32 of 43
• Frictional vs. Structural Unemployment: What’s the Difference? 33 of 43
• Structural vs. Cyclical Unemployment: What's the Difference? 34 of 43
• Cyclical Unemployment: Definition, Cause, Types, and Example 35 of 43
• Disguised Unemployment: Definition and Different Types 36 of 43
• Employment-to-Population Ratio: Definition and What It Measures 37 of 43
• Frictional Unemployment: Definition, Causes, and Quit Rate Explained 38 of 43
• Full Employment: Definition, Types, and Examples 39 of 43
• Labor Force Participation Rate: Purpose, Formula, and Trends 40 of 43
• Labor Market Explained: Theories and Who Is Included 41 of 43
• What Is the Natural Unemployment Rate? 42 of 43
• Structural Unemployment: Definition, Causes, and Examples 43 of 43

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The Pandemic's Impact on Unemployment and Labor Force Participation Trends

Following early 2020 responses to the pandemic, labor force participation declined dramatically and has remained below its 2019 level, whereas the unemployment rate recovered briskly. We estimate the trend of labor force participation and unemployment and find a substantial impact of the pandemic on estimates of trend. It turns out that levels of labor force participation and unemployment in 2021 were approaching their estimated trends. A return to 2019 levels would then represent a tight labor market, especially relative to long-run demographic trends that suggest further declines in the participation rate.

At the end of 2019, the labor market was hotter than it had been in years. Unemployment was at a historic low, and participation in the labor market was finally increasing after a prolonged decline. That tight labor market came to an abrupt halt with the COVID-19 pandemic in the spring of 2020.

Now, two years later, the labor market has mostly recovered from the depths of the pandemic recession. The unemployment rate is close to pre-pandemic lows, and job openings are at record highs. Yet, participation and employment rates have remained persistently below pre-pandemic levels. This suggests the possibility that the pandemic has permanently reduced participation in the economy and that current participation rates reflect a new normal. In this article, we explore how the pandemic has affected labor markets and whether a new normal is emerging.

What Is "Normal"?

One way to define the normal level of a variable is to estimate its trend and compare the observed data with the estimated trend values. Constructing a trend essentially means drawing a smooth line through the variations in the actual data.

But this means that constructing the trend for a point in time typically involves considering what happened both before and after that point in time. Thus, constructing the trend at the end of a sample is especially hard, since we do not yet know how the data will evolve.

We construct trends for three aggregate labor market ratios — the labor force participation (LFP) rate, the unemployment rate and the employment-population ratio (EPOP) — using methods described in our 2019 article " Projecting Unemployment and Demographic Trends ."

First, we estimate statistical models for LFP and unemployment rates of demographic groups defined by age, gender and education. For each gender and education, we decompose its unemployment and LFP into cyclical components common to all age groups and smooth local trends for age and cohort effects.

Second, we aggregate trends from the estimates of the group-specific trends. Specifically, we construct the trend for the aggregate LFP rate as the population-share-weighted sum of the corresponding estimated trends for demographic groups. We construct the aggregate unemployment rate and EPOP trends from the group-specific LFP and unemployment trends and the groups' population shares.

In our previous work, we estimated the trends for the unemployment rate and LFP rate of a gender-education group separately using maximum likelihood methods. The estimates reported in this article are based on the joint estimation of LFP and unemployment rate trends using Bayesian methods.

We separately estimate the trends using data from 1976 to 2019 (pre-pandemic) and from 1976 to 2021 (including the pandemic period). Figures 1, 2 and 3 display annual averages for the three aggregate labor market ratios — the LFP rate, the unemployment rate and EPOP, respectively — from 1976 to 2021.

In each figure, the solid black line denotes the observed values, and the blue and pink lines denote the estimated trend using data from 1976 up to and including 2019 and 2021, respectively. The estimated trends are subject to uncertainty, and the plotted trends represent the median estimate of the trend.

For the estimates based on data up to 2021, we also include the 90 percent coverage area shown as the shaded pink area. According to the statistical model, there is a 90 percent probability that the trend is contained in the coverage area. The blue and pink dotted lines represent our projections on how the labor market ratios will evolve until 2031, again based on the estimated trend up to and including 2019 and 2021. The shaded gray vertical areas highlight recessions as defined by the National Bureau of Economic Research (NBER).

Pre-Pandemic Trends: 1976-2019

We start with the pre-pandemic trends for the LFP rate and unemployment rate estimated for data from 1976 through 2019. After a long recovery from the 2007-09 recession, the LFP rate was 63.1 percent in 2019 (slightly above the estimated trend value of 62.8 percent), and the unemployment rate was 3.7 percent (noticeably below its estimated trend value of 4.7 percent).

The LFP rate being above trend and the unemployment rate being below trend reflects the characterization of the 2019 labor market as "hot." But note that even though the LFP rate exceeded its trend value in 2019, it was still lower than during the 2007-09 period. This difference is accounted for by the declining trend in the LFP rate.

As noted in our 2019 article , LFP rates and unemployment rates differ systematically across demographic groups. Participation rates tend to be higher for younger, more-educated workers and for men. Unemployment rates tend to be lower for men and for the older and more-educated population.

Thus, changes in the population composition over time — that is, the relative size of demographic groups — will affect the aggregate LFP and unemployment rates, in addition to changes in the LFP and unemployment rate trends of the demographic groups.

As also noted in our 2019 article, the hump-shaped trend of the aggregate LFP rate reflects a variety of forces:

• Prior to 1990, the aggregate LFP rate was boosted by an upward trend in the LFP rate of women. But after 1990, the LFP rate of women began declining. Combining this with declining trend LFP rates for other demographic groups has reduced the aggregate LFP rate.
• Changes in the age distribution had a limited impact prior to 2005, but the aging population since then has lowered the aggregate LFP rate substantially.
• Increasing educational attainment has contributed positively to aggregate LFP throughout the period.

The steady decline of the unemployment rate trend reflects mostly the contributions from an older and more-educated population and, to some extent, a decline in the trend unemployment rates of demographic groups.

Pre-Pandemic Expectations of Future LFP and Unemployment Trends

Our statistical model of smooth local trends for the LFP and unemployment rates of demographic groups has the property that the best forecast for future trend values of demographic groups is their last estimated trend value. Thus, the model will only predict a change in the trend of aggregate ratios if the population shares of its constituent groups are changing.

We combine the U.S. Census Bureau population forecasts for the gender-age groups with an estimated statistical model of education shares for gender-age groups to forecast population shares of our demographic groups from 2020 to 2031 (the dotted blue lines in Figures 1 and 2).

As we can see, the changing demographics alone imply further reductions of 1 percentage point and 0.2 percentage points in the trend LFP rate and unemployment rate, respectively. This projection is driven by the forecasted aging of the population, which is only partially offset by the forecasted higher educational attainment.

Based on data up to 2019, the same aggregate LFP rates in 2021 as in 2019 would have represented a substantial cyclical deviation upward from the pre-pandemic trends.

It is notable that the unemployment rate is much more volatile relative to its trend than the LFP rate is. In other words, cyclical deviations from trend are much more pronounced for the unemployment rate than for the LFP rate.

In fact, in our estimation, the behavior of the unemployment rate determines the common cyclical component of both the unemployment rate and the LFP rate. Whereas the unemployment rate spikes in recessions, the LFP rate response is more muted and tends to lag recessions. This feature will be important for interpreting how the estimated trend LFP rate changed with the pandemic.

Finally, Figure 3 combines the information from the LFP rate and unemployment rate and plots actual and trend rates for EPOP. On the one hand, given the relatively small trend decline of the unemployment rate, the trend for EPOP mainly reflects the trend for the LFP rate and inherits its hump-shaped path and the projected decline over the next 10 years. On the other hand, EPOP inherits the volatility from the unemployment rate. In 2019, EPOP is notably above trend, by about 1 percentage point.

Unemployment and Labor Force Participation During the Pandemic

The behavior of unemployment resulting from the pandemic-induced recession was different from past recessions:

• The entire increase in unemployment between February and April 2020 was accounted for by the increase in unemployment from temporary layoffs. This differed from previous recessions, when a spike in permanent layoffs led the bulge of unemployment in the trough.
• The recovery started in May 2020, and the speed of recovery was also much faster than in previous recessions. After only seven months, unemployment declined by 8 percentage points.
• The behavior of the unemployment rate is reflected in the 2020 recession being the shortest NBER recession on record: It lasted for two months (March to April 2020).

To summarize, the runup and decline of the unemployment rate during the pandemic were unusually rapid, but the qualitative features were not that different from previous recessions after properly accounting for temporary layoffs, as noted in the 2020 working paper " The Unemployed With Jobs and Without Jobs . "

The decline in the LFP rate was sharp and persistent. The LFP rate dropped from 63.4 percent in February 2020 to 60.2 percent in April 2020, an unprecedented drop during such a short period of time. After a rebound to 61.7 percent in August 2020, the LFP rate essentially moved sideways and remained below 62 percent until the end of 2021.

The large drop in the aggregate LFP rate has been attributed to, among others:

• More people — especially women — leaving the labor force to care for children because of school closings or to care for relatives at increased health risk, as noted in the 2021 work " Assessing Five Statements About the Economic Impact of COVID-19 on Women (PDF) " and the 2021 article " Caregiving for Children and Parental Labor Force Participation During the Pandemic "
• An increase in retirement due to health concerns, as noted in the 2021 working paper " How Has COVID-19 Affected the Labor Force Participation of Older Workers? "
• Generous pandemic income transfers and unemployment insurance programs, as noted in the 2021 article " COVID Transfers Dampening Employment Growth, but Not Necessarily a Bad Thing "

All of these factors might impact the participation trend, but by how much?

The Pandemic's Effect on Trend Estimates for LFP and Unemployment

The aggregate trend assessment for the LFP and unemployment rates has changed considerably as a result of 2020 and 2021. Repeating the estimation of trend and cycle for our demographic groups using data from 1976 up to 2021 yields the pink trend lines in Figures 1 and 2.

The updated trend estimates now put the positive cyclical gap in 2019 for LFP at 0.5 percentage points (rather than 0.3 percentage points) and the negative cyclical gap for the unemployment rate at 1.4 percentage points (rather than 1 percentage point). That is, by this estimate of the trend, the labor market in 2019 was even hotter than by the estimates from the 1976-2019 period.

In 2021, the actual LFP rate is essentially at trend, and the unemployment rate is only slightly above trend. That is, by this estimate of the trend, the labor market is relatively tight.

Notice that even though the new 2021 trend estimates for both the LFP and the unemployment rates differ noticeably from the trend values predicted for 2021 based on data up to 2019, the trend revisions for the LFP rate are limited to more recent years, whereas the trend revisions for the unemployment rate apply to the whole sample.  

The difference in revisions is related to how confident we can be about the estimated trends. The 90 percent coverage area is quite narrow for the LFP rate for the entire sample up to the last four years. Thus, there is no need to drastically revise the estimated trend prior to 2017.

On the other hand, the 90 percent coverage area for the trend unemployment rate is quite broad throughout the sample. That is, a wide range of values for trend unemployment is potentially consistent with observed unemployment values. Consequently, the last two observations lead to a wholesale reassessment of the level of the trend unemployment rate.

Another way to frame the 2020-21 trend revisions is as follows. The unemployment rate is very cyclical, deviations from trend are large, and though the sharp increase and decline of the unemployment rate in 2020-21 is unusual, an upward level shift of the trend unemployment rate best reflects the additional pandemic data.

The LFP rate, however, is usually not very cyclical, and it is only weakly related to the unemployment rate. Since the model assumes that the cyclical response does not change over the sample, it then attributes the large 2020-21 drop of the LFP rate to a decline in its trend and ultimately to a decline of the trend LFP rates of most demographic groups.

Finally, the EPOP trend is again mainly determined by the LFP trend, seen in Figure 3. Including the pandemic years noticeably lowers the estimated trend for the years from 2017 onwards. The cyclical gap in 2019 is now estimated to be 1.4 percentage points, and 2021 EPOP is close to its estimated trend.

What Does the Future Hold?

In our framework, current estimates of trend LFP and the unemployment rate for demographic groups are the best forecasts of future rates. Combined with projected demographic changes, this implies a continued noticeable downward trend for the LFP rate and a slight downward trend for the unemployment rate.

The trend unemployment rate is low, independent of how we estimate the trend. But given the highly unusual circumstances of the pandemic, the model may well overstate the decline in the trend LFP rate. Therefore, it is likely that the "true" trend lies somewhere between the trends estimated using data up to 2019 and data up to 2021.

That being a possibility, it remains that labor markets as of now have been unusually tight by most other measures, such as nominal wage growth and posted job openings relative to hires. This suggests that the true trend is closer to the revised 2021 trend than to the 2019 trend. In other words, the LFP rate and unemployment rate at the end of 2021 relative to the 2021 estimate of trend LFP and unemployment rate are consistent with a tight labor market.

Andreas Hornstein is a senior advisor in the Research Department at the Federal Reserve Bank of Richmond. Marianna Kudlyak is a research advisor in the Research Department at the Federal Reserve Bank of San Francisco.

To cite this Economic Brief, please use the following format: Hornstein, Andreas; and Kudlyak, Marianna. (April 2022) "The Pandemic's Impact on Unemployment and Labor Force Participation Trends." Federal Reserve Bank of Richmond Economic Brief , No. 22-12.

This article may be photocopied or reprinted in its entirety. Please credit the authors, source, and the Federal Reserve Bank of Richmond and include the italicized statement below.

V iews expressed in this article are those of the authors and not necessarily those of the Federal Reserve Bank of Richmond or the Federal Reserve System.

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23.1: The Relationship Between Inflation and Unemployment

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The Phillips Curve

The Phillips curve shows the inverse relationship between inflation and unemployment: as unemployment decreases, inflation increases.

learning objectives

• Review the historical evidence regarding the theory of the Phillips curve

The Phillips curve relates the rate of inflation with the rate of unemployment. The Phillips curve argues that unemployment and inflation are inversely related: as levels of unemployment decrease, inflation increases. The relationship, however, is not linear. Graphically, the short-run Phillips curve traces an L-shape when the unemployment rate is on the x-axis and the inflation rate is on the y-axis.

Theoretical Phillips Curve : The Phillips curve shows the inverse trade-off between inflation and unemployment. As one increases, the other must decrease. In this image, an economy can either experience 3% unemployment at the cost of 6% of inflation, or increase unemployment to 5% to bring down the inflation levels to 2%.

The early idea for the Phillips curve was proposed in 1958 by economist A.W. Phillips. In his original paper, Phillips tracked wage changes and unemployment changes in Great Britain from 1861 to 1957, and found that there was a stable, inverse relationship between wages and unemployment. This correlation between wage changes and unemployment seemed to hold for Great Britain and for other industrial countries. In 1960, economists Paul Samuelson and Robert Solow expanded this work to reflect the relationship between inflation and unemployment. Because wages are the largest components of prices, inflation (rather than wage changes) could be inversely linked to unemployment.

The theory of the Phillips curve seemed stable and predictable. Data from the 1960’s modeled the trade-off between unemployment and inflation fairly well. The Phillips curve offered potential economic policy outcomes: fiscal and monetary policy could be used to achieve full employment at the cost of higher price levels, or to lower inflation at the cost of lowered employment. However, when governments attempted to use the Phillips curve to control unemployment and inflation, the relationship fell apart. Data from the 1970’s and onward did not follow the trend of the classic Phillips curve. For many years, both the rate of inflation and the rate of unemployment were higher than the Phillips curve would have predicted, a phenomenon known as “stagflation. ” Ultimately, the Phillips curve was proved to be unstable, and therefore, not usable for policy purposes.

US Phillips Curve (2000 – 2013) : The data points in this graph span every month from January 2000 until April 2013. They do not form the classic L-shape the short-run Phillips curve would predict. Although it was shown to be stable from the 1860’s until the 1960’s, the Phillips curve relationship became unstable – and unusable for policy-making – in the 1970’s.

The Relationship Between the Phillips Curve and AD-AD

Changes in aggregate demand cause movements along the Phillips curve, all other variables held constant.

• Relate aggregate demand to the Phillips curve

The Phillips Curve Related to Aggregate Demand

The Phillips curve shows the inverse trade-off between rates of inflation and rates of unemployment. If unemployment is high, inflation will be low; if unemployment is low, inflation will be high.

The Phillips curve and aggregate demand share similar components. The Phillips curve is the relationship between inflation, which affects the price level aspect of aggregate demand, and unemployment, which is dependent on the real output portion of aggregate demand. Consequently, it is not far-fetched to say that the Phillips curve and aggregate demand are actually closely related.

To see the connection more clearly, consider the example illustrated by. Let’s assume that aggregate supply, AS, is stationary, and that aggregate demand starts with the curve, AD 1 . There is an initial equilibrium price level and real GDP output at point A. Now, imagine there are increases in aggregate demand, causing the curve to shift right to curves AD 2 through AD4. As aggregate demand increases, unemployment decreases as more workers are hired, real GDP output increases, and the price level increases; this situation describes a demand-pull inflation scenario.

Phillips Curve and Aggregate Demand : As aggregate demand increases from AD1 to AD4, the price level and real GDP increases. This translates to corresponding movements along the Phillips curve as inflation increases and unemployment decreases.

As more workers are hired, unemployment decreases. Moreover, the price level increases, leading to increases in inflation. These two factors are captured as equivalent movements along the Phillips curve from points A to D. At the initial equilibrium point A in the aggregate demand and supply graph, there is a corresponding inflation rate and unemployment rate represented by point A in the Phillips curve graph. For every new equilibrium point (points B, C, and D) in the aggregate graph, there is a corresponding point in the Phillips curve. This illustrates an important point: changes in aggregate demand cause movements along the Phillips curve.

The Long-Run Phillips Curve

The long-run Phillips curve is a vertical line at the natural rate of unemployment, so inflation and unemployment are unrelated in the long run.

• Examine the NAIRU and its relationship to the long term Phillips curve

The Phillips curve shows the trade-off between inflation and unemployment, but how accurate is this relationship in the long run? According to economists, there can be no trade-off between inflation and unemployment in the long run. Decreases in unemployment can lead to increases in inflation, but only in the short run. In the long run, inflation and unemployment are unrelated. Graphically, this means the Phillips curve is vertical at the natural rate of unemployment, or the hypothetical unemployment rate if aggregate production is in the long-run level. Attempts to change unemployment rates only serve to move the economy up and down this vertical line.

Natural Rate Hypothesis

The natural rate of unemployment theory, also known as the non-accelerating inflation rate of unemployment (NAIRU) theory, was developed by economists Milton Friedman and Edmund Phelps. According to NAIRU theory, expansionary economic policies will create only temporary decreases in unemployment as the economy will adjust to the natural rate. Moreover, when unemployment is below the natural rate, inflation will accelerate. When unemployment is above the natural rate, inflation will decelerate. When the unemployment rate is equal to the natural rate, inflation is stable, or non-accelerating.

To get a better sense of the long-run Phillips curve, consider the example shown in. Assume the economy starts at point A and has an initial rate of unemployment and inflation rate. If the government decides to pursue expansionary economic policies, inflation will increase as aggregate demand shifts to the right. This is shown as a movement along the short-run Phillips curve, to point B, which is an unstable equilibrium. As aggregate demand increases, more workers will be hired by firms in order to produce more output to meet rising demand, and unemployment will decrease. However, due to the higher inflation, workers’ expectations of future inflation changes, which shifts the short-run Phillips curve to the right, from unstable equilibrium point B to the stable equilibrium point C. At point C, the rate of unemployment has increased back to its natural rate, but inflation remains higher than its initial level.

NAIRU and Phillips Curve : Although the economy starts with an initially low level of inflation at point A, attempts to decrease the unemployment rate are futile and only increase inflation to point C. The unemployment rate cannot fall below the natural rate of unemployment, or NAIRU, without increasing inflation in the long run.

The reason the short-run Phillips curve shifts is due to the changes in inflation expectations. Workers, who are assumed to be completely rational and informed, will recognize their nominal wages have not kept pace with inflation increases (the movement from A to B), so their real wages have been decreased. As such, in the future, they will renegotiate their nominal wages to reflect the higher expected inflation rate, in order to keep their real wages the same. As nominal wages increase, production costs for the supplier increase, which diminishes profits. As profits decline, suppliers will decrease output and employ fewer workers (the movement from B to C). Consequently, an attempt to decrease unemployment at the cost of higher inflation in the short run led to higher inflation and no change in unemployment in the long run.

The NAIRU theory was used to explain the stagflation phenomenon of the 1970’s, when the classic Phillips curve could not. According to the theory, the simultaneously high rates of unemployment and inflation could be explained because workers changed their inflation expectations, shifting the short-run Phillips curve, and increasing the prevailing rate of inflation in the economy. At the same time, unemployment rates were not affected, leading to high inflation and high unemployment.

The Short-Run Phillips Curve

The short-run Phillips curve depicts the inverse trade-off between inflation and unemployment.

• Interpret the short-run Phillips curve

The Phillips curve depicts the relationship between inflation and unemployment rates. The long-run Phillips curve is a vertical line that illustrates that there is no permanent trade-off between inflation and unemployment in the long run. However, the short-run Phillips curve is roughly L-shaped to reflect the initial inverse relationship between the two variables. As unemployment rates increase, inflation decreases; as unemployment rates decrease, inflation increases.

Short-Run Phillips Curve : The short-run Phillips curve shows that in the short-term there is a tradeoff between inflation and unemployment. Contrast it with the long-run Phillips curve (in red), which shows that over the long term, unemployment rate stays more or less steady regardless of inflation rate.

Consider the example shown in. When the unemployment rate is 2%, the corresponding inflation rate is 10%. As unemployment decreases to 1%, the inflation rate increases to 15%. On the other hand, when unemployment increases to 6%, the inflation rate drops to 2%.

Historical application

During the 1960’s, the Phillips curve rose to prominence because it seemed to accurately depict real-world macroeconomics. However, the stagflation of the 1970’s shattered any illusions that the Phillips curve was a stable and predictable policy tool. Nowadays, modern economists reject the idea of a stable Phillips curve, but they agree that there is a trade-off between inflation and unemployment in the short-run. Given a stationary aggregate supply curve, increases in aggregate demand create increases in real output. As output increases, unemployment decreases. With more people employed in the workforce, spending within the economy increases, and demand-pull inflation occurs, raising price levels.

Therefore, the short-run Phillips curve illustrates a real, inverse correlation between inflation and unemployment, but this relationship can only exist in the short run . The idea of a stable trade-off between inflation and unemployment in the long run has been disproved by economic history.

Relationship Between Expectations and Inflation

There are two theories of expectations (adaptive or rational) that predict how people will react to inflation.

• Distinguish adaptive expectations from rational expectations

The short-run Phillips curve is said to shift because of workers’ future inflation expectations. Yet, how are those expectations formed? There are two theories that explain how individuals predict future events.

Real versus Nominal Quantities

To fully appreciate theories of expectations, it is helpful to review the difference between real and nominal concepts. Anything that is nominal is a stated aspect. In contrast, anything that is real has been adjusted for inflation. To make the distinction clearer, consider this example. Suppose you are opening a savings account at a bank that promises a 5% interest rate. This is the nominal, or stated, interest rate. However, suppose inflation is at 3%. The real interest rate would only be 2% (the nominal 5% minus 3% to adjust for inflation).

The difference between real and nominal extends beyond interest rates. In an earlier atom, the difference between real GDP and nominal GDP was discussed. The distinction also applies to wages, income, and exchange rates, among other values.

Adaptive Expectations

The theory of adaptive expectations states that individuals will form future expectations based on past events. For example, if inflation was lower than expected in the past, individuals will change their expectations and anticipate future inflation to be lower than expected.

To connect this to the Phillips curve, consider. Assume the economy starts at point A at the natural rate of unemployment with an initial inflation rate of 2%, which has been constant for the past few years. Accordingly, because of the adaptive expectations theory, workers will expect the 2% inflation rate to continue, so they will incorporate this expected increase into future labor bargaining agreements. This way, their nominal wages will keep up with inflation, and their real wages will stay the same.

Expectations and the Phillips Curve : According to adaptive expectations theory, policies designed to lower unemployment will move the economy from point A through point B, a transition period when unemployment is temporarily lowered at the cost of higher inflation. However, eventually, the economy will move back to the natural rate of unemployment at point C, which produces a net effect of only increasing the inflation rate.According to rational expectations theory, policies designed to lower unemployment will move the economy directly from point A to point C. The transition at point B does not exist as workers are able to anticipate increased inflation and adjust their wage demands accordingly.

Now assume that the government wants to lower the unemployment rate. To do so, it engages in expansionary economic activities and increases aggregate demand. As aggregate demand increases, inflation increases. Because of the higher inflation, the real wages workers receive have decreased. For example, assume each worker receives $100, plus the 2% inflation adjustment. Each worker will make $102 in nominal wages, but $100 in real wages. Now, if the inflation level has risen to 6%. Workers will make $102 in nominal wages, but this is only $96.23 in real wages.

Although the workers’ real purchasing power declines, employers are now able to hire labor for a cheaper real cost. Consequently, employers hire more workers to produce more output, lowering the unemployment rate and increasing real GDP. On, the economy moves from point A to point B.

However, workers eventually realize that inflation has grown faster than expected, their nominal wages have not kept pace, and their real wages have been diminished. They demand a 4% increase in wages to increase their real purchasing power to previous levels, which raises labor costs for employers. As labor costs increase, profits decrease, and some workers are let go, increasing the unemployment rate. Graphically, the economy moves from point B to point C.

This example highlights how the theory of adaptive expectations predicts that there are no long-run trade-offs between unemployment and inflation. In the short run, it is possible to lower unemployment at the cost of higher inflation, but, eventually, worker expectations will catch up, and the economy will correct itself to the natural rate of unemployment with higher inflation.

Rational Expectations

The theory of rational expectations states that individuals will form future expectations based on all available information, with the result that future predictions will be very close to the market equilibrium. For example, assume that inflation was lower than expected in the past. Individuals will take this past information and current information, such as the current inflation rate and current economic policies, to predict future inflation rates.

As an example of how this applies to the Phillips curve, consider again. Assume the economy starts at point A, with an initial inflation rate of 2% and the natural rate of unemployment. However, under rational expectations theory, workers are intelligent and fully aware of past and present economic variables and change their expectations accordingly. They will be able to anticipate increases in aggregate demand and the accompanying increases in inflation. As such, they will raise their nominal wage demands to match the forecasted inflation, and they will not have an adjustment period when their real wages are lower than their nominal wages. Graphically, they will move seamlessly from point A to point C, without transitioning to point B.

In essence, rational expectations theory predicts that attempts to change the unemployment rate will be automatically undermined by rational workers. They can act rationally to protect their interests, which cancels out the intended economic policy effects. Efforts to lower unemployment only raise inflation.

Shifting the Phillips Curve with a Supply Shock

Aggregate supply shocks, such as increases in the costs of resources, can cause the Phillips curve to shift.

• Give examples of aggregate supply shock that shift the Phillips curve

The Phillips curve shows the relationship between inflation and unemployment. In the short-run, inflation and unemployment are inversely related; as one quantity increases, the other decreases. In the long-run, there is no trade-off. In the 1960’s, economists believed that the short-run Phillips curve was stable. By the 1970’s, economic events dashed the idea of a predictable Phillips curve. What could have happened in the 1970’s to ruin an entire theory? Stagflation caused by a aggregate supply shock.

Stagflation and Aggregate Supply Shocks

Stagflation is a combination of the words “stagnant” and “inflation,” which are the characteristics of an economy experiencing stagflation: stagnating economic growth and high unemployment with simultaneously high inflation. The stagflation of the 1970’s was caused by a series of aggregate supply shocks. In this case, huge increases in oil prices by the Organization of Petroleum Exporting Countries (OPEC) created a severe negative supply shock. The increased oil prices represented greatly increased resource prices for other goods, which decreased aggregate supply and shifted the curve to the left. As aggregate supply decreased, real GDP output decreased, which increased unemployment, and price level increased; in other words, the shift in aggregate supply created cost-push inflation.

Aggregate Supply Shock : In this example of a negative supply shock, aggregate supply decreases and shifts to the left. The resulting decrease in output and increase in inflation can cause the situation known as stagflation.

Shifting the Phillips Curve

The aggregate supply shocks caused by the rising price of oil created simultaneously high unemployment and high inflation. At the time, the dominant school of economic thought believed inflation and unemployment to be mutually exclusive; it was not possible to have high levels of both within an economy. Consequently, the Phillips curve could not model this situation. For high levels of unemployment, there were now corresponding levels of inflation that were higher than the Phillips curve predicted; the Phillips curve had shifted upwards and to the right. Thus, the Phillips curve no longer represented a predictable trade-off between unemployment and inflation.

Disinflation

Disinflation is a decline in the rate of inflation, and can be caused by declines in the money supply or recessions in the business cycle.

• Identify situations with disinflation

Inflation is the persistent rise in the general price level of goods and services. Disinflation is a decline in the rate of inflation; it is a slowdown in the rise in price level. As an example, assume inflation in an economy grows from 2% to 6% in Year 1, for a growth rate of four percentage points. In Year 2, inflation grows from 6% to 8%, which is a growth rate of only two percentage points. The economy is experiencing disinflation because inflation did not increase as quickly in Year 2 as it did in Year 1, but the general price level is still rising. Disinflation is not to be confused with deflation, which is a decrease in the general price level.

Disinflation can be caused by decreases in the supply of money available in an economy. It can also be caused by contractions in the business cycle, otherwise known as recessions. The Phillips curve can illustrate this last point more closely. Consider an economy initially at point A on the long-run Phillips curve in. Suppose that during a recession, the rate that aggregate demand increases relative to increases in aggregate supply declines. This reduces price levels, which diminishes supplier profits. As profits decline, employers lay off employees, and unemployment rises, which moves the economy from point A to point B on the graph. Eventually, though, firms and workers adjust their inflation expectations, and firms experience profits once again. As profits increase, employment also increases, returning the unemployment rate to the natural rate as the economy moves from point B to point C. The expected rate of inflation has also decreased due to different inflation expectations, resulting in a shift of the short-run Phillips curve.

Disinflation : Disinflation can be illustrated as movements along the short-run and long-run Phillips curves.

Inflation vs. Deflation vs. Disinflation

To illustrate the differences between inflation, deflation, and disinflation, consider the following example. Assume the following annual price levels as compared to the prices in year 1:

• Year 1: 100% of Year 1 prices
• Year 2: 104% of Year 1 prices
• Year 3: 106% of Year 1 prices
• Year 4: 107% of Year 1 prices
• Year 5: 105% of Year 1 prices

As the economy moves through Year 1 to Year 4, there is a continued growth in the price level. This is an example of inflation; the price level is continually rising. However, between Year 2 and Year 4, the rise in price levels slows down. Between Year 2 and Year 3, the price level only increases by two percentage points, which is lower than the four percentage point increase between Years 1 and 2. The trend continues between Years 3 and 4, where there is only a one percentage point increase. This is an example of disinflation; the overall price level is rising, but it is doing so at a slower rate.

Between Years 4 and 5, the price level does not increase, but decreases by two percentage points. This is an example of deflation; the price rise of previous years has reversed itself.

• The relationship between inflation rates and unemployment rates is inverse. Graphically, this means the short-run Phillips curve is L-shaped.
• A.W. Phillips published his observations about the inverse correlation between wage changes and unemployment in Great Britain in 1958. This relationship was found to hold true for other industrial countries, as well.
• From 1861 until the late 1960’s, the Phillips curve predicted rates of inflation and rates of unemployment. However, from the 1970’s and 1980’s onward, rates of inflation and unemployment differed from the Phillips curve’s prediction. The relationship between the two variables became unstable.
• Aggregate demand and the Phillips curve share similar components. The rate of unemployment and rate of inflation found in the Phillips curve correspond to the real GDP and price level of aggregate demand.
• Changes in aggregate demand translate as movements along the Phillips curve.
• If there is an increase in aggregate demand, such as what is experienced during demand-pull inflation, there will be an upward movement along the Phillips curve. As aggregate demand increases, real GDP and price level increase, which lowers the unemployment rate and increases inflation.
• The natural rate of unemployment is the hypothetical level of unemployment the economy would experience if aggregate production were in the long-run state.
• The natural rate hypothesis, or the non-accelerating inflation rate of unemployment (NAIRU) theory, predicts that inflation is stable only when unemployment is equal to the natural rate of unemployment. If unemployment is below (above) its natural rate, inflation will accelerate (decelerate).
• Expansionary efforts to decrease unemployment below the natural rate of unemployment will result in inflation. This changes the inflation expectations of workers, who will adjust their nominal wages to meet these expectations in the future. This leads to shifts in the short-run Phillips curve.
• The natural rate hypothesis was used to give reasons for stagflation, a phenomenon that the classic Phillips curve could not explain.
• The long-run Phillips curve is a vertical line at the natural rate of unemployment, but the short-run Phillips curve is roughly L-shaped.
• The inverse relationship shown by the short-run Phillips curve only exists in the short-run; there is no trade-off between inflation and unemployment in the long run.
• Economic events of the 1970’s disproved the idea of a permanently stable trade-off between unemployment and inflation.
• Nominal quantities are simply stated values. Real quantities are nominal ones that have been adjusted for inflation.
• Adaptive expectations theory says that people use past information as the best predictor of future events. If inflation was higher than normal in the past, people will expect it to be higher than anticipated in the future.
• Rational expectations theory says that people use all available information, past and current, to predict future events. If inflation was higher than normal in the past, people will take that into consideration, along with current economic indicators, to anticipate its future performance.
• According to adaptive expectations, attempts to reduce unemployment will result in temporary adjustments along the short-run Phillips curve, but will revert to the natural rate of unemployment. According to rational expectations, attempts to reduce unemployment will only result in higher inflation.
• In the 1970’s soaring oil prices increased resource costs for suppliers, which decreased aggregate supply. The resulting cost-push inflation situation led to high unemployment and high inflation ( stagflation ), which shifted the Phillips curve upwards and to the right.
• Stagflation is a situation where economic growth is slow (reducing employment levels) but inflation is high.
• The Phillips curve was thought to represent a fixed and stable trade-off between unemployment and inflation, but the supply shocks of the 1970’s caused the Phillips curve to shift. This ruined its reputation as a predictable relationship.
• Disinflation is not the same as deflation, when inflation drops below zero.
• During periods of disinflation, the general price level is still increasing, but it is occurring slower than before.
• The short-run and long-run Phillips curve may be used to illustrate disinflation.
• Phillips curve : A graph that shows the inverse relationship between the rate of unemployment and the rate of inflation in an economy.
• stagflation : Inflation accompanied by stagnant growth, unemployment, or recession.
• aggregate demand : The the total demand for final goods and services in the economy at a given time and price level.
• Natural Rate of Unemployment : The hypothetical unemployment rate consistent with aggregate production being at the long-run level.
• non-accelerating inflation rate of unemployment : (NAIRU); theory that describes how the short-run Phillips curve shifts in the long run as expectations change.
• adaptive expectations theory : A hypothesized process by which people form their expectations about what will happen in the future based on what has happened in the past.
• rational expectations theory : A hypothesized process by which people form their expectations about what will happen in the future based on all relevant information.
• supply shock : An event that suddenly changes the price of a commodity or service. It may be caused by a sudden increase or decrease in the supply of a particular good.
• disinflation : A decrease in the inflation rate.
• inflation : An increase in the general level of prices or in the cost of living.
• deflation : A decrease in the general price level, that is, in the nominal cost of goods and services.

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Unemployment Causes and Effects Essay

Introduction, causes of unemployment, effects of unemployment, works cited.

Unemployment causes and effects are vital to recognize in order to solve the problem. Analyzing them can also allow people to realize what consequences are to expect. Yet, first of all, all the essential terminology should be defined.

Unemployment refers to a state of not having a job. It entails individuals with the ability to work, a resolve to find employment, available and in the hunt for employment (Stone 25). Categories of unemployment include classical, structural, frictional, cyclical, and hidden types.

Classical unemployment entails a situation in which earnings received for a job go beyond ordinary levels. This results in limited job vacancies for people. The structural type refers to a situation in which unemployed individuals fail to meet job requirements in terms of skills needed (Stone 29). Frictional unemployment concerns the changeover phase between jobs, while the cyclical one refers to a state in which claims in the economy fail to offer jobs to people. When the claim for goods and services lowers, there is a limited production that requires few workers (Stone 29). Finally, the hidden type refers to the unemployment of prospective workers due to errors made in generating statistics on the subject (Stone 30).

The causes and effects of unemployment impact individuals, society and the economy in general. The overall problem issue results from various factors relating to social, economic, environmental, political and individual elements in an economy. So, to gather both consequences and causes of unemployment, this essay attempts to consider and analyze them separately.

Unemployment results from several causes and factors related to an economy. Some causes are due to personal choices while others are beyond individual control (Stone 31). People invest many resources in gaining reputable education and eligibility for jobs, but often find themselves with no employment (Stone 34). Unemployment results from factors and causes discussed below.

The first cause is inflation. Inflation refers to the progressive increase in prices of commodities and services in the economy. Economic inflation is one of the major causes of unemployment (Stone 37). Inflation results in a limited market activity by economies that cannot match efforts by others due to escalating prices. The economy experiences trouble, and progressively employers fire some workers to reduce the cost of production. This result in unemployment among the individuals fired.

The second cause is recession. Recession refers to decline Gross Domestic Product (GDP) of an economy, employment rate and market activity (Dawson 75). Economic recession links directly with economic inflation. Recession results from inflation where people are not able to afford goods and services offered by the economy (Stone 41).

A decline in production and more imports than exports characterize a recession. These elements influence negatively on GDP of an economy. This results in increased rates of unemployment because many employers refuse to hire while others fire some of their employees (Stone 43).

Another cause is change in technology. Rapid change in technology is driving many employers into diversifying and improving the effectiveness of their workforce (Dawson 78). Some of technology applied replaces individuals in the production process as some process executed manually apply through technology.

This leads to several people losing their jobs. Job dissatisfaction is also another leading cause of unemployment (Dawson 78). New technology results in some employees being involved partially in production activities, which leads to frustration. Frustrations may lead to employee resignation (Dawson 80). This causes unemployment.

Another cause is employee worth (Dawson 85). Employees put a lot of effort and dedication in their activities but often end up unappreciated by their employers. This may result to lack of motivation among employees, which may compel them to stop working for their employers (Dawson 85).

This leads to individuals being unemployed until they find employers who appreciate their efforts. Discrimination in places of work is another cause of unemployment. Discrimination could be because of age, gender, social class, race, religion or ethnic background. Securing a job in such a working environment is extremely difficult and may discourage people from looking for jobs as well as forcing those already in jobs to quit (Dawson 87).

Other causes of unemployment relate to an individual and include disability, attitude towards potential employers, negative perceptions about jobs and employees as well as an individual’s ability to look for a job (Dawson 93). Welfare payments should be discouraged as they reduce the will of unemployed people to look for jobs. People develop dependency on grants and lack any meaning in employment since they are able to meet their basic needs (Dawson 98).

Unemployment has both positive and negative effects. However, negative effects of unemployment surpass positive effects (Stone 65). Unemployed individuals experience difficulties meeting their basic needs as well as contributing to economic prosperity of their countries (Stone 66). In recessions, many people lose their jobs, but companies usually develop mechanisms to produce more goods with limited workforce. Unemployment leads to effects discussed below.

The first effect is loss of income. Unemployment results in individuals losing their source of income and livelihood. Most people in employment use their incomes to get mortgages and other forms of financing (Stone 69). Loss of income leads to poor living standards and increased risk on health.

Another effect of unemployment is social exclusion. A work place provides a platform for socialization. When people lose their jobs, their social circle reduces considerably and end up excluded from the social environment. Other social problems associated with unemployment include crime, bribery and gambling (Stone 70).

Unemployment causes political instability (Stone 75). When majority of a country’s population is unemployed, life becomes hard, and people develop hostile characters. They consider their government as ineffective and incapable of providing the needs of its people (Stone 76). Such individuals participate in movements that oppose government policies through riots that result in political instability.

effects of unemployment include over exploitation of available labor, reduced rate of economic growth, reduced human capacity, loss of human resources and increase in poverty levels (Dawson 101). One positive effect of unemployment is the availability of adequate labor at reduced market prices. When many people are unemployed, labor is available at competitive prices because people are always eager to have some income (Stone 80).

Unemployment has various categories that include classical, structural, frictional, cyclical and hidden unemployment (Stone 26). Unemployment results from several factors that vary in terms of the supporting conditions. Some causes are due to personal choices while others are beyond individual control. Unemployment has both positive and negative effects, although negative effects surpass positive effects. Welfare payments should be discouraged as they reduce the will of unemployed people to look for jobs (Stone 50).

People should be encouraged to look for a job instead of waiting on grants because they may not achieve financial freedom to satisfactory levels. In order to reduce the effects of unemployment, governments should develop and implement policies that regulate circumstances in which an employer can fire an employee (Dawson 90). This will prevent victimization of employees by employers who take advantage of weak policies on labor regulation and employee protection.

Dawson, Graham. Inflation and Unemployment: Causes, Consequences and Cures . California: University of California, 2008. Print.

Stone, Jack. Unemployment: The Shocking Truth of Its Causes, Its Outrageous Consequences and What Can Be Done About It . New York: Trafford on Demand Pub, 2007. Print.

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Home — Essay Samples — Economics — Unemployment — Unemployment: Causes, Effects, and Solutions

Unemployment: Causes, Effects, and Solutions

• Categories: Unemployment

About this sample

Words: 685 |

Published: Jan 30, 2024

Words: 685 | Pages: 2 | 4 min read

Table of contents

Introduction, causes of unemployment, effects of unemployment, solutions to combat unemployment, a. economic factors.

• Global recession: During economic downturns, companies may reduce employment to cut costs and remain competitive.
• Automation and technological advancements: The use of machines and technology may replace human workers in some industries, leading to job losses.
• Outsourcing of jobs: Companies may choose to outsource jobs to other countries where labor costs are lower, leaving domestic workers unemployed.

B. Societal Factors

• Lack of education and skills: Individuals without proper education and job training may be ill-equipped to meet the demands of a constantly evolving job market.
• Discrimination in hiring processes: Certain groups, such as women, minorities, and older workers, may face barriers in securing employment due to discrimination.
• Dependency on welfare programs: Some individuals may choose to remain on welfare programs due to a lack of incentive to enter the workforce or because they cannot find suitable employment.

A. Economic Effects

• Reduction in consumer spending: Without a steady income, unemployed individuals may have less money to spend, resulting in a decline in consumer spending.
• Decline in government revenue: With fewer people working, the government may see a decline in tax revenue, which can impact its ability to provide necessary services and promote economic growth.
• Increase in social welfare expenses: The government may need to allocate more funds toward social welfare programs, such as unemployment benefits and food assistance, to support those who are unemployed.

B. Social Effects

• Increase in crime rates: Individuals who are unemployed may resort to criminal activities to make ends meet, leading to a rise in crime rates.
• Mental health issues: Unemployment can cause stress, anxiety, and depression, which can negatively impact an individual's mental health.
• Strained relationships and family instability: Unemployment may cause financial strain and tension within families, leading to relationship problems and instability.

A. Economic Solutions

• Encouraging entrepreneurship and small business development: Providing resources and support for individuals to start their own businesses can lead to job creation and economic growth.
• Promoting vocational training and skill development programs: Ensuring that individuals have access to education and training programs can increase their job readiness and competitiveness in the job market.
• Implementing balanced trade policies: Creating policies that promote fair trade and reduce job outsourcing can protect domestic jobs and promote job growth.

B. Social Solutions

• Addressing educational disparities and providing access to quality education: Providing quality education to disadvantaged communities can improve their job readiness and reduce unemployment rates.
• Combating discrimination in the workplace: Enforcing anti-discrimination laws and promoting diversity and inclusion in the workplace can reduce barriers to employment for certain groups.
• Strengthening social safety net programs: Ensuring that social welfare programs are designed to incentivize work and provide support to those in need can promote economic stability and reduce poverty.
• Bureau of Labor Statistics. (2021, October 8). Employment Situation Summary. https://www.bls.gov/news.release/empsit.nr0.htm

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Unemployment Essay for Students and Children

500+ words essay on unemployment.

Unemployment is a very serious issue not only in India but in the whole world. There are hundreds and thousands of people out there who do not have employment . Besides, the problems of unemployment are very severe in India because of the growing population and demand for jobs. Moreover, if we neglect this problem then it will be going to become the reason for the doom of the nation.

What is Unemployment?

Unemployment refers to a situation in which a skilled and talented people wanted to do a job. But cannot find a proper job due to several reasons.

Types of Unemployment

Now we know what is unemployment but unemployment does not only mean that the person does not have a job. Likewise, unemployment also includes people working in areas out of their expertise.

The various types of unemployment include disguised unemployment, seasonal unemployment, open unemployment, technological unemployment, structural unemployment. Besides, some other unemployment is cyclic unemployment, educated unemployment, underemployment, frictional unemployment, chronic unemployment, and casual unemployment.

Above all, seasonal unemployment, under unemployment, and disguised unemployment are the most common unemployment that is found in India.

Reasons for Unemployment

In a country like India, there is much reason for a large section of the population for being unemployed. Some of these factors are population growth, slow economic growth , seasonal occupation, slow growth of the economic sector, and fall in the cottage industry.

Moreover, these are the major reason for unemployment in India. Also, the situation has become so drastic that highly educated people are ready to do the job of a sweeper. Besides, the government is not doing his work seriously.

Apart from all these, a large portion of the population is engaged in the agricultural sector and the sector only provides employment in harvest or plantation time.

In addition, the biggest reason of unemployment in India is its vast population which demands a large number of jobs every year which the government and authorities are unable to provide.

Consequences of Unemployment

If things will go on like the current scenario then unemployment will become a major issue. Apart from this, the following things happen in an economy which is an increase in poverty, an increase in crime rate, exploitation of labor, political instability, mental health, and loss of skills. As a result, all this will eventually lead to the demise of the nation.

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Initiative by Government

The government has taken the problem very seriously and have taken measures to slowly reduce unemployment. Some of these schemes includes IRDP (Integrated Rural Development Programme), DPAP (Drought Prone Area Programme), Jawahar Rozgar Yojana, Employment Assurance Scheme, NRY (Nehru Rozgar Yojana), Training for self-Employment, PMIUPEP (Prime Minister’s Integrated Urban Poverty Eradication Program), employment exchange, Employment Guarantee Scheme, development of organized sector, small and cottage industries, employment in forging countries, and Jawahar Gram Samridhi Yojana and few more.

Besides, these schemes the government also make some rules flexible, so that employment can be created in the private sector also.

To conclude, we can say that the problem of unemployment in India has reached a critical stage. But, now the government and local authorities have taken the problem seriously and working on it to reduce unemployment. Also, to completely solve the issue of unemployment we have to tackle the main issue of unemployment that is the vast population of India.

FAQs about Unemployment

Q.1 Why there is a problem of unemployment in India? A.1 Due to overpopulation and lack of proper skills there is a problem of unemployment in India.

Q.2 Define Disguised unemployment? A.2 Disguised unemployment refers to a form of employment in which more than the required numbers of people work in industry or factory. And removing some employee will not affect productivity.

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Units:   Percent , Seasonally Adjusted

Frequency:   Monthly

The unemployment rate represents the number of unemployed as a percentage of the labor force. Labor force data are restricted to people 16 years of age and older, who currently reside in 1 of the 50 states or the District of Columbia, who do not reside in institutions (e.g., penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces. This rate is also defined as the U-3 measure of labor underutilization. The series comes from the 'Current Population Survey (Household Survey)' The source code is: LNS14000000

Suggested Citation:

U.S. Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UNRATE, April 23, 2024.

Units:   Percent , Not Seasonally Adjusted

Averages of daily figures. For additional historical federal funds rate data, please see Daily Federal Funds Rate from 1928-1954 . The federal funds rate is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. (1) The rate that the borrowing institution pays to the lending institution is determined between the two banks; the weighted average rate for all of these types of negotiations is called the effective federal funds rate.(2) The effective federal funds rate is essentially determined by the market but is influenced by the Federal Reserve through open market operations to reach the federal funds rate target.(2) The Federal Open Market Committee (FOMC) meets eight times a year to determine the federal funds target rate. As previously stated, this rate influences the effective federal funds rate through open market operations or by buying and selling of government bonds (government debt).(2) More specifically, the Federal Reserve decreases liquidity by selling government bonds, thereby raising the federal funds rate because banks have less liquidity to trade with other banks. Similarly, the Federal Reserve can increase liquidity by buying government bonds, decreasing the federal funds rate because banks have excess liquidity for trade. Whether the Federal Reserve wants to buy or sell bonds depends on the state of the economy. If the FOMC believes the economy is growing too fast and inflation pressures are inconsistent with the dual mandate of the Federal Reserve, the Committee may set a higher federal funds rate target to temper economic activity. In the opposing scenario, the FOMC may set a lower federal funds rate target to spur greater economic activity. Therefore, the FOMC must observe the current state of the economy to determine the best course of monetary policy that will maximize economic growth while adhering to the dual mandate set forth by Congress. In making its monetary policy decisions, the FOMC considers a wealth of economic data, such as: trends in prices and wages, employment, consumer spending and income, business investments, and foreign exchange markets. The federal funds rate is the central interest rate in the U.S. financial market. It influences other interest rates such as the prime rate, which is the rate banks charge their customers with higher credit ratings. Additionally, the federal funds rate indirectly influences longer- term interest rates such as mortgages, loans, and savings, all of which are very important to consumer wealth and confidence.(2) References (1) Federal Reserve Bank of New York. "Federal funds." Fedpoints, August 2007. (2) Board of Governors of the Federal Reserve System. " Monetary Policy ".

Board of Governors of the Federal Reserve System (US), Federal Funds Effective Rate [FEDFUNDS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/FEDFUNDS, April 23, 2024.

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• Monthly, Seasonally Adjusted (population data is not adjusted for seasonal variation; not seasonally adjusted version used)
• Table A-10. Selected unemployment indicators, Seasonally adjusted: Monthly, Unemployment Rates
• Table A-15. Alternative measures of labor underutilization: Monthly, Seasonally Adjusted
• Selected Interest Rates Instruments, Yields in percent per annum: Monthly

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Unemployment Essay Sample

Unemployment is the state of being jobless and seeking employment, or not having a job. It’s one of the most terrifying things that can happen to an individual. The number of unemployed people in the US is increasing and it’s time we took a closer look at what this means for our society. This essay will explore its causes and inferences.

Here is a sample essay on unemployment given by the experts to students. It could be used as a standard essay to write such other essays for the assignments.

Essay Example on Unemployment

• Thesis Statement of Unemployment Essay
• Introduction of Unemployment Essay
• Cause of Unemployment in the World
• Inferences of the Unemployment in a society of Nation
• How to deter the Problem of Unemployment at Global Scale

Thesis Statement of Unemployment Essay Unemployment gives rise to anarchy, terrorism, and a threat to the internal security of a nation. I ntroduction of Unemployment Essay Today the most fundamental problem that is engulfing society is the issue of unemployment. People are not able to manage two squares of meals per day. This issue cannot be ignored by us at any point as it is eating the structure of our society like a termite thus making it hollow from the inside. There are many problems that arise due to unemployment like terrorism in society which is dangerous for humankind. The issue could be addressed at the most be getting solutions on the problem of unemployment in society, which acts as the causing effect of terrorism and other problems. Main Body of Unemployment Essay Cause of Unemployment in the World The major cause of unemployment in society is the improper management of resources and giving unequal status to the people of society. Here are some major causes of unemployment given below. Unequal Distribution of resources The economic resources are unequally distributed among the people in a society of the nation at large. As a consequence of which some sections get mighty wealth as compared to others. Excessive deflation Another biggest cause that lies behind the cause of unemployment in society is the excessive deflation in the country. When people have to sell their products below the manufacturing cost they find no profit in the business. There comes a time when this business is closed by the businessmen due to lack of profit in the work. Many people lose their employment due to this reason. Mismanagement of the Banking and Financial Institution Loan and other Financial Help are given to the businessmen easily as compared to the common masses. As a result of which there is not a development of the poor people as they cannot invest money for any innovative purpose by owing a loan from the bank. This corruption is the cause of unemployment in a poor section of society. Get Non-Plagiarized Custom Essay on Unemployment in USA Order Now Inferences of the Unemployment in a society of Nation Here are the main results of unemployment in a given nation of a particular society. Students become the enemy of other’s lives in these states. Terrorism –  In the scarcity of jobs youth people join many terrorist groups for the sake of earning livelihood for their families. Thus the rise of terrorism could be backed by the unemployment problem. Human Trafficking –  The biggest issue of human trafficking is unemployment; many women and men are being transferred across the national and international boundaries for this reason. People do not have enough money to rare their families and thus get involved in such anti-social practices to earn money. Social Riots –  Social riots are also the conclusion of unemployment as communities get irritated when other people from a different community get employment. This emotion of wrath and jealously is very strong which even kills the lives of many innocent. Communal Issues –  Many times it also gives rise to the communal issue when social riots take their final destination. It could be the most serious result of unemployment in any society. How to deter the Problem of Unemployment at Global Scale The issue of unemployment is not a small problem that could be easily uprooted by society. Its roots had gone very deep into society and it is very difficult to eradicate them. It could be done by making certain efforts by every person in the world. Here are some points that could be considered by the people to eradicate the unemployment problem from society or the world at large. Equal Distribution of Economic Resources The economic resources must be equally distributed among the people so that this issue of unemployment and accumulation of wealth could be solved. Though it is a difficult thing to do but still if we make some plans for it, success could be achieved in it. Reduction in Corruption Corruption is a major issue that causes a huge part of the unemployment problems. This could be reduced by the efficient bureaucrats of the nation. Skill Oriented study The education should be skilled oriented so that people can work easily to save their livelihood. The education system should also encourage students to create new jobs and employment generation. Buy Customized Essay on Unemployment At Cheapest Price Order Now Conclusion The above discussions and arguments about unemployment draw a conclusion that though the issue is very big it could be solved by making efforts. Certain plans and strategies are needed to achieve the dream of eradicating the unemployment issue from society. Intelligentsia of the society needs to pay big attention towards this field of unemployment. Thus we can save our world from ill practices like terrorism and riots.

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The number of Americans applying for jobless benefits holds steady as labor market remains strong

A hiring sign is displayed in Riverwoods, Ill., Tuesday, April 16, 2024. On Thursday, April 18, 2024, the Labor Department reports on the number of people who applied for unemployment benefits last week. (AP Photo/Nam Y. Huh)

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The number of Americans filing for jobless benefits didn’t change last week as the labor market continues to defy efforts by the Federal Reserve to cool hiring.

The Labor Department reported Thursday that unemployment claims for the week ending April 13 were unchanged from the previous week’s 212,000.

The four-week average of claims, which softens some of the weekly volatility, was also unchanged at 214,500.

Weekly unemployment claims are considered a proxy for the number of U.S. layoffs in a given week and a sign of where the job market is headed. They have remained at historically low levels since the pandemic purge of millions of jobs in the spring of 2020.

The Federal Reserve raised its benchmark borrowing rate 11 times beginning in March of 2022 in a bid to stifle the four-decade high inflation that took hold after the economy rebounded from the COVID-19 recession of 2020. The Fed’s intention was to loosen the labor market and cool wage growth, which it said contributed to persistently high inflation.

Many economists thought there was a chance the rapid rate hikes could cause a recession, but jobs have remained plentiful and the economy forged on thanks to strong consumer spending.

Last month, U.S. employers added a surprising 303,000 jobs , yet another example of the U.S. economy’s resilience in the face of high interest rates. The unemployment rate dipped from 3.9% to 3.8% and has now remained below 4% for 26 straight months, the longest such streak since the 1960s.

Though layoffs remain at low levels, companies have been announcing more job cuts recently , mostly across technology and media. Google parent company Alphabet, Apple , eBay, TikTok, Snap, Amazon, Cisco Systems and the Los Angeles Times have all recently announced layoffs.

Outside of tech and media, UPS , Macy’s, Tesla and Levi Strauss also have recently cut jobs.

In total, 1.81 million Americans were collecting jobless benefits during the week that ended April 6, an increase of 2,000 from the previous week.

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Essay on unemployment 15 Models

Last updated Friday , 15-03-2024 on 11:20 am

Essay on unemployment is important for every student, and we will write several models for essay on unemployment, such as a short essay on unemployment or a paragraph, or a 250-word essay, a long essay on unemployment.

Unemployment is a serious social problem and has negative effects on both the individual and society. Therefore, we find that writing an essay about it is important and should deal with an introduction and a conclusion as well, and we will present an essay on unemployment with the elements.

There are several models to suit all students, in the primary, preparatory and secondary levels.

Essay on unemployment

Unemployment is one of the biggest problems facing countries, and this problem has increased recently as a result of the spread of the Corona virus (Covid-19), as many factories, companies and stores were closed, export and import stopped, and the tourism sector and other government institutions. stopped working

The high unemployment rate in some countries was a clear indication of the deterioration of their economy and the low level of per capita income.

The government is working to solve this problem to avoid the negative effects that result from it, because unemployment has negative effects on both the individual and society.

Definition of unemployment

Unemployment is defined as the increase in the number of people looking for a job over the number of jobs offered  in the labor market.

The unemployment rate is determined by calculating the percentage by dividing the number of job seekers by the number of the labor force. The labor force means the sum of working people and people looking for jobs.

Undoubtedly, the higher the unemployment rate in society, the more this indicates the existence of major economic problems.

Therefore, we find that there is a continuous follow-up to determine the unemployment rate in society, and to try to develop solutions to this problem.

The main types of unemployment

There is no doubt that every young man dreams of having a job after graduating from university, but this dream is not easily achieved, and the percentage of the unemployed has increased.

And we can define the unemployed as the one who is looking for a job and wants it but does not find it, and we do not mean by it those who do not want to work, such as some rich young people or the elderly and those who receive a pension, and the young people who are still studying, all of these are not from the unemployed, and they are not counted in the unemployment rate in society.

Among the most important types of unemployment are the following:

1- Classic unemployment among young people

Unemployment among young people is one of the most dangerous types of unemployment, because young people are the energy of society, and they are able to work well.

A job is the dream of every young man after he finishes his studies. But often young people are shocked by the bitter reality, after he finished his studies, he could not find any suitable job for him. As a result, young people are forced to do much less work than they had previously dreamed of. In most cases, they are jobs that do not require a great deal of education.

And some of the young people refuse to work, and keep looking for their dream job, and in many cases they do not find it.

2- Disguised unemployment

The name disguised unemployment is called the increase in the number of people who work in a job, more than the number required to complete that work, We see this clearly in government institutions and bodies. Where it is overcrowded with employees and there is no real production commensurate with their number.

Accordingly, the numbers in excess of the need for work are unemployed people, but they receive salaries. The state cannot take measures against them (such as dismissing them or firing them from work) in order to take into account their social conditions.

3- Seasonal unemployment

Seasonal unemployment is unemployment that recurs permanently, because there are some jobs associated with certain times of the year, or related to some projects. Many workers work in this business. When the project or work season ends, these people become unemployed.

4- Long-term unemployment

The number of citizens looking for work is monitored through labor offices and other government institutions.

The numbers who join a job, and the numbers that did not find a job, are monitored. People who are looking for work and they did not find during a period of more than 27 weeks they are called long-term unemployment.

5- Short-term unemployment

The number of citizens looking for work is also monitored through labor offices and other government institutions.

The numbers who join a job, and the numbers that did not find a job, are monitored. Individuals who are looking for work and have not found a job within a period of less than 27 weeks is called short-term unemployment.

6- Cyclical unemployment

Cyclical unemployment also occurs in a large proportion, and it is due to the capital cycle, or because a person moves from one job to another. But in most cases, the period of unemployment is limited, and the individual can join work again.

Causes of unemployment

• The gap between the number of job seekers and the number of existing jobs. Some may attribute this reason to the increase in population. But we must benefit from human wealth by preparing and training them, and providing job opportunities that benefit both the individual and society.
• The mismatch between the skills of individuals and the skills required for the labor market. The state bears the biggest mistake in this matter, as the academic preparation of students does not comply with the requirements of the labor market.
• The high interest rate, which is one of the reasons for the high unemployment rate in society. As businessmen and the rich prefer to put their money in banks if the interest is high, Thus, they do not invest in agriculture, industry, or trade. All of this leads to a lack of job opportunities and an increase in the unemployment rate.
• Natural disasters, which are also one of the factors that increase the unemployment rate, For example, earthquakes, volcanoes, tsunamis, hurricanes, heavy rain, drought, desertification and other natural phenomena, all of these phenomena have an impact on human life and may lead to unemployment of many of them. Where many people lose their jobs and money as a result of natural disasters.
• The spread of epidemics is one of the factors that increase the unemployment rate, and we have recently witnessed the impact of the Corona epidemic (Covid-19) on the economy of countries, especially developing countries, where their economy has deteriorated, and many people have lost their jobs and money.
• Technological development and machine solutions in place of labor was one of the most important causes of the unemployment problem. The problem of unemployment appeared after the Industrial Revolution, in which the machine became more widely used, and the labor force was laid off. The greater the technological progress, the greater the layoff, and the greater the unemployment.
• Internal or external migration is one of the causes of unemployment. This is like the migration of citizens from the countryside to the cities, which makes the number of people looking for work much greater than the number of jobs.
• The global recession greatly affects the economy of all countries, especially developing countries, as the world has become intertwined in economic matters, and the movement of trade, import and export, and others. When the economy is weak and buying is scarce, many people lose their jobs and join the unemployed.

The effects of unemployment on the individual

Unemployment has many negative effects on the individual, as it affects all aspects of his life, especially if he is married and has a family he is responsible for.

The biggest problem that a person can face is his inability to provide the necessary money to buy his basic needs and the needs of his family.

1- The low level of income and consequently the deterioration of living conditions, which puts the person under severe psychological pressure.

2- Increasing the financial burden, as the unemployed person cannot compensate for the money he spends, and therefore he will spend all his savings, and after that he will not find what to spend.

3 – Borrowing and the accumulation of debts, happen a lot because there are basic requirements, and it is impossible to dispense with them.

4- The high rate of mental and physical diseases. Undoubtedly, the unemployed person is under great psychological and nervous pressure, which causes him psychological diseases such as depression, stress and anxiety. In addition, he suffers from other diseases such as high pressure, heart disease and others.

5- The tendency to commit suicide is the most dangerous effect caused by unemployment, because the unemployed person who is unable to provide for the needs of his family is under great nervous and psychological pressure, which may lead him to commit suicide if he does not find a solution to his problem.

6- Hatred of society is one of the negative effects resulting from unemployment, because the unemployed person will hate others, and hatred will spread among members of society.

7- Lack of loyalty to the homeland is one of the most dangerous negative effects of unemployment, as a person will hate his homeland and search for another country that provides him with a better living.

The effects of unemployment on society

Unemployment has negative effects on society, as unemployment is closely related to the economy. The stronger the economy, the more projects and job opportunities, and thus the lower the unemployment rate in society.

Certainly, the economy is a sign of the strength or weakness of the state. In recent times, wars have become very economic.

Among the negative effects of unemployment on society are the following:

1- The loss of political stability, and this is a dangerous thing because political instability will lead to a deterioration in the state of the economy.

2- The high crime rate is one of the negative effects of unemployment, as some individuals resort to theft, bribery and other crimes to get money.

3- Family disintegration and the high rate of divorce, as a result of the man’s inability to provide for the family’s needs.

4- Searching for illegal ways to immigrate, and this is what young people always think of without caring about the risks that may take their lives.

5- Weakness of the economy as a result of not benefiting from the workforce.

6- Skilled migration abroad in search of good job opportunities.

7- Increasing financial allocations for subsidy, which helps the economy deteriorate rapidly.

8- The spread of poverty among the classes of citizens and the arrival of large numbers of citizens below the poverty line.

The effect of unemployment on the economy

There is no doubt that the relationship between the economy and unemployment is close, as unemployment is an important indicator of the strength or weakness of the economy.

The higher the unemployment rate, the weaker the economy, and the lower the economic growth. While the low unemployment rate indicates the recovery and strength of the economy.

Among the negative effects of unemployment are:

• Lack of production, and not benefiting from the unemployed workforce.
• Consumption of products, and the need to import larger quantities.
• Increase aid, and borrow from abroad.

All of these negative effects exacerbate economic problems, which may eventually lead to the state’s inability to pay its foreign debts.

The policy adopted to solve the unemployment problem

Encouraging the private sector.

Encouraging small businesses.

Develop education according to the required jobs.

Investing the components of the state to provide job opportunities for young people, such as investing waste lands in agriculture and animal investment, or encouraging small industries that complement other industries.

At the end of a topic about unemployment and its negative effects on both the individual and society, we must advise young people to acquire the largest number of experiences in order to be able to find a job for themselves.

Also, small projects, in which several people participate, are a good solution.

It is also important in order to eliminate the phenomenon of unemployment to study the needs of the labor market, and to make education in line with these needs.

Unemployment Essay in English

Many people suffer from difficulty in getting a good job opportunity. This is because job opportunities are much less than the number of people willing to work. Some of these people prefer unemployment rather than working in jobs below their educational level.

There are some tips that young people should follow in order to get a good job. Including self-development through the diversity of experiences in their specialization.

University study is no longer sufficient, but the young man must develop himself through specialized courses, learn more than one language, learn computer science and other modern sciences.

This is what every individual should do after job opportunities have become few, because unemployment has a negative impact on an individual’s life, whether in the economic, social and health aspects.

Paragraph on unemployment

The problem of unemployment arose with the beginning of the Industrial Revolution, as the machine became more widely used, and thus labor was largely dispensed with. This problem is exacerbated by increasing technological progress. As a result, a large number of individuals cannot find suitable work for them.

And the jobs required a special quality of employees, and they were required to be fully acquainted with the English language and computer science.

Therefore, young people must gain several experiences in order to get a good job, and there is a great development in the requirements of the labor market.

Trade, for example, through the Internet (online shopping) has become the most prevalent, and technology has become more widely used in agriculture and industry as well.

Unemployment solutions essay

The problem of unemployment has become a global problem, and it is important that we look for realistic solutions to this problem. Among these solutions is the encouragement of small projects, which are managed by one individual or a group of individuals, in addition to encouraging investors to establish huge projects that provide many job opportunities for young people.

It is important that education at the secondary and university levels meet the demands of the labor market, so that the student will not be shocked after graduating from university that what he has studied has nothing to do with the needs of the labor market.

Also, allocating funds to subsidize non-workers until they find a job is necessary, in order to avoid the risks that result from the high rate of unemployment in society, such as the high crime rate in society, family disintegration and other social and health problems.

Unemployment Essay in English 250 Words

The problem of unemployment has become a global problem, and it is a serious problem that affects both the individual and society. Therefore, the causes of this problem are studied and followed up, in order to find real solutions.

The causes of the unemployment problem differ from one society to another. There are societies that attribute this phenomenon to overpopulation, and thus encourage families to control birth, provide them with the necessary medicines for this, and use the media to direct families to birth control.

While other countries encourage national and foreign investment, in order to provide job opportunities for their citizens. Other countries encourage the establishment of projects that require many labors, and thus we find that there are many solutions to overcome the problem of unemployment.

It is important for each country to study this phenomenon separately, and to know what its causes are, so that it can develop appropriate solutions to solve the problem of unemployment. Individuals must also develop their skills, and have multiple experiences that qualify them to join the work.

The existence of solutions to the problem of unemployment is very important, because unemployment has negative effects on both the individual and society, and unemployment is considered an indicator of the strength or weakness of the state’s economy.

Unemployment essay introduction

Undoubtedly, the problem of unemployment troubles many countries, especially developing countries. This is because the high rate of unemployment in society leads to political instability.

When the government cannot provide the needs of citizens, by providing them with job opportunities, and they receive a salary sufficient to purchase their needs, then demonstrations, crimes and other acts of violence and sabotage will increase, and all this leads to political instability.

While the rich countries solve this problem by giving unemployment aid, which is an amount of money that is sufficient to purchase the needs of individuals, and is given to unemployed people until they find a suitable job for them.

The high unemployment rate among members of society will lead to an increase in poverty and the spread of psychological and mental illnesses.

Youth unemployment essay

Undoubtedly, young people are the most important group in society, and they must hold great hopes for nations.

Young people are characterized by strength, enthusiasm, and aspiration for a better future. Therefore, the government must provide job opportunities for young people, so that these opportunities are appropriate to their scientific abilities.

It is desirable for young people to arm themselves with science, and to acquire all the experiences that qualify them for the labor market. It has become necessary to learn modern sciences, especially technological sciences, and computer science. English language proficiency has also become a requirement for most jobs. The government must look for real solutions to solve the unemployment problem, because the risks of unemployment are very bad for both the individual and society.

Short essay on unemployment

The unemployment rate is a real indicator of the state’s economy. When the economy is strong, there are huge projects in various fields. Thus, job opportunities will be available to many of the unemployed.

A strong economy is followed by a circulation of money, sales increase, and imports and exports increase. All of this provides many job opportunities for the unemployed youth. Therefore, there must be projects that absorb the unemployed labor force.

The work is beneficial to both the individual and society, whereby the individual can live a decent life and provide for his family’s needs easily. The society can advance economically, and thus it can progress in all other areas, such as health, education and services.

Technology and unemployment essay

Technology has caused the disappearance of many jobs. The machine has become more accurate and faster than the human being. This made many people lose their jobs, especially in the agricultural and industrial fields. Where the agricultural and industrial sectors absorb large numbers of workers and employees. As for today, it has become mainly dependent on machines.

Also, modern jobs require that the employee be qualified to deal with modern technology, Therefore, young people must develop themselves and learn modern sciences, especially technological sciences.

The educational curricula should also be developed, and provide students with skills required in the labor market.

If everyone does what he should do, the unemployment rate in society will decrease.

Unemployment as a social problem essay

Undoubtedly, unemployment is a social problem that affects not only the individual but also his family, and unemployment has negative effects on society as a whole. The causes of unemployment differ from one society to another. But we can define unemployment as the increase in the number of people looking for a job over the number of people required for this job.

In this case, the person may accept a job that is less than his ambitions, and may refrain from working until he finds a job suitable for his academic qualification.

In all cases, there must be various solutions to this problem, such as encouraging foreign investment, establishing large projects, encouraging the private sector, encouraging self-projects and small projects.

All the previous solutions help to solve the unemployment problem to a large extent.

Problem of unemployment essay

There are negative effects of unemployment, some of which pertain to the individual and others to society.

One of the serious negative effects that the individual is exposed to is his lack of money to buy his basic needs and the needs of his family.

At that time, we expect the person to react badly. He may accept a bribe, steal, or kill in order to get money.

Thus, the crime rate in society will increase.

As a result, investors will flee to safer countries. Thus, job opportunities will decrease further, and thus the unemployed will increase and crimes will increase, and so on. The unemployment problem will only get worse if it is not resolved quickly.

One of the problems facing society as a result of the increase in the unemployment rate is the spread of poverty, and thus the increase in financial allocations to provide aid to unemployed people, and this becomes a burden on the economy of poor countries.

Essay on unemployment in 250 words

Unemployment may signal the beginning of the end of the state. In many countries that collapse and declare bankruptcy, the beginning of the matter is the high unemployment rate in them.

When there are fewer projects, less investment and production, and import becomes much greater than export, it will be difficult to solve the problem of unemployment.

As a result, the crime rate in society increases, and it is difficult to control citizens. Demonstrations and anti-government revolutions erupt, causing the state to collapse.

Therefore, the government must find real solutions to the unemployment problem. Such as encouraging the private sector to set up projects that require a lot of manpower, or allow citizens to immigrate to other countries with good job opportunities.

The damages of unemployment do not affect society only, but also affect the individual, causing him economic problems and represented in his inability to provide for his family’s needs, which causes him psychological and nervous pressure. In many cases, people commit suicide because of their inability to earn enough money for their lives.

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Advancing social justice, promoting decent work

Ilo is a specialized agency of the united nations.

World Employment and Social Outlook – Trends 2018

ILO: Unemployment and decent work deficits to remain high in 2018

The ILO’s flagship report shows that while the global unemployment rate is stabilizing, unemployment and decent work deficits will stay at persistently high levels in many parts of the world.

Vulnerable employment is on the rise and the pace of working poverty reduction is slowing

Looking ahead, structural shifts and ageing will add further pressures on the labour market.

Main regional findings

Northern africa.

• The unemployment rate should decline from 11.7 per cent in 2017 to 11.5 per cent in 2018.
• The number of unemployed remains steady at 8.7 million amidst strong growth in the labour force.
• Globally, the region features the highest unemployment rate driven by large gaps for youth and women who are significantly over-represented among the unemployed.

Sub-Saharan Africa

• The unemployment rate is expected to reach 7.2 per cent, essentially remaining unchanged.
• The number of unemployed should increase by 1 million due to the region’s high levels of labour force growth.
• More than one in three workers is living in conditions of extreme poverty, while almost three out of four workers are in vulnerable employment.

Northern America

• Unemployment is likely to decline from 4.7 per cent in 2017 to 4.5 per cent in 2018.
• This is driven by a decline in the unemployment rates in both Canada and the United States.

Latin America and the Caribbean

• The unemployment rate is projected to decrease only marginally, going from 8.2 per cent in 2017 to 7.7 per cent by 2019.
• Considering that the regional unemployment rate was as low as 6.1 per cent in 2014, the region is still far from fully recovering from the employment losses of recent years.

Arab states

• Labour market conditions are expected to remain relatively stable, with the regional unemployment rate projected to slightly decline to 8.3 per cent in 2018 and to edge upward in 2019.
• As a result, almost 5 million people will be unemployed in 2018, with women accounting for almost one third of the unemployed pool despite representing only 16 per cent of the regional labour force.

Asia and the Pacific

• Unemployment should remain low by international standards and rather stable over the forecast period, at 4.2 per cent.
• This is largely due to the fact that the region is expected to continue to create jobs at a fast rate.
• The number of employed persons is projected to grow by some 23 million between 2017 and 2019.
• Vulnerable employment affects almost half of all workers, more than 900 million, in the region.

Northern, Southern and Western Europe

• Sustained by better-than-expected economic activity, the unemployment rate is projected to have decreased from 9.2 per cent in 2016 to 8.5 per cent in 2017, the lowest rate since 2008.
• The largest reductions in unemployment rates, of the order of 2 percentage points, are likely to be seen in Spain and Greece (15.4 and 19.5 per cent respectively in 2018).
• The unemployment rate should also continue to fall in 2018 in Italy, Ireland and Portugal but at a slower pace than over the period 2015-2017.
• It should remain stable in France and in the UK, although in the latter country it is expected to slightly edge upward in 2019.

Eastern Europe

• As economic growth rebounds considerably, the unemployment rate is projected to decline, but only modestly, reaching 5.3 per cent in 2018 from 5.5 per cent in 2017.
• This reflects falling unemployment rates in countries such as Poland, Ukraine and Slovakia, only partly offset by the expectation of growing unemployment in the Czech Republic.

Central and Western Asia

• The relatively strong rebound in economic growth is only partially translating into falling unemployment. The regional unemployment rate is expected to remain at around 8.6 per cent throughout 2018 and 2019.
• Vulnerable employment remains persistently high, affecting more than 30 per cent of workers in 2017 but it is estimated to slightly decline over 2018 and 2019 (0.6 percentage points).

Jobs market 'incredibly tight' despite rise in unemployment

Australia's headline unemployment rate increased slightly to 3.8 per cent in March, after employment fell by 7,000 people and unemployment rose by 21,000 people.

The small drop in employment led to the unemployment rate lifting 0.1 percentage points, up from 3.7 per cent in February.

However, a less noisy measure of unemployment gives a clearer picture of where the labour market's sitting.

Data shows the 'trend' unemployment rate remained steady in March — at 3.9 per cent — for the fifth month in a row, reflecting some underlying strength in the economy.

"Despite a small drop in employment, Australia's labour market remains incredibly tight," said Callam Pickering, APAC senior economist at global job site Indeed.

On Thursday, coinciding with the release of the March unemployment data, the Reserve Bank also published its latest edition of its quarterly Bulletin.

It had a special section  that explained how the RBA assesses "full employment."

It said RBA officials look at a range of indicators to understand how "tight" the labour market is and, together, those indicators suggested conditions were still tight in the labour market but had eased relative to when things were "very tight" in late 2022.

That message was displayed in the below graphic.

The graphic compared the latest observation of key labour market indicators (blue dots) with observations of recent extreme labour market tightness from October 2022 (orange dots) and more typical labour market outcomes since the year 2000 (grey bars).

"The easing in the labour market since late 2022 is most evident in measures that tend to be leading indicators, such as firms’ employment intentions," the RBA Bulletin said.

Labour market easing, but cost-of-living pressures still biting

On Thursday, ANZ senior economist Blair Chapman said it looked like the labour market had "resumed easing" in March.

But he said it could still be running "slightly hotter" than the RBA was forecasting a few months ago, and unemployment may have to increase faster in coming months for the RBA to meet its inflation target.

And that relative tightness in the labour market, coupled with high inflation and cost-of-living pressures, means conditions remain tricky for many businesses. 

Dr Corbin Barry, a Sydney dentist, says he's been finding it hard to recruit support staff who will stick around for the long term.

At the start of the year, Dr Barry had six employees at his newly-opened inner Sydney dental clinic — but now he's down to four.

"When I hired everyone at the practice, I was optimistic about what the future held for us as a small business," he said.

"What I found is that it's really hard getting people [patients] through the door because of the [cost-of-living] crisis at the moment."

Dr Barry said he'd noticed more patients were cutting back on dental treatment – treating it as a "discretionary" service during this high inflation environment.

Another challenge was giving his staff enough hours at work, and a sense of career progression.

"Even if they're working full time hours with me, I do find that they'll work an additional Saturday [elsewhere], for example, doing temporary work, to try and ensure that they can keep up with cost-of-living pressures," he said.

"When I wake up, my stress is, can I pay the staff this week? And how can I make sure that I can do that for the long term? Not 'what holiday am I going on in July?'," he said.

Wage growth to moderate

Gareth Aird, head of Australian economics at Commonwealth Bank, said the labour market was clearly loosening.

But he said it was only loosening at a "moderate" pace, which was at odds with the "very weak" growth in economic activity.

However, he said he expected unemployment to keep rising this year, and tipped the unemployment rate to hit 4.5 per cent by December.

"According to Seek, the number of applicants per job ad continues to march higher," he said in a note on Thursday.

"Applicants per job ad are up by 67.7 per cent over the year. Indeed, applications per job ad are a little over 50 per cent higher than pre-pandemic levels.

"This is a sign that the labour market has become increasingly competitive," he said.

Mr Aird said the increase in labour market competitiveness was weighing on growth in advertised salaries.

"According to Seek, advertised salaries rose by 0.2 per cent in February (the same as January) … these are the slowest monthly rates of growth since December 2021," he said.

"Again, this is consistent with a loosening labour market. And it will also help to moderate the pace of wages growth in 2024, which will assist with the disinflation process."

EY senior economist Paula Gadsby said she expected the March unemployment data to provide the beginnings of a clearer read on underlying labour market conditions.

She said shifts in seasonal patterns impacted the data in the first two months of this year.

"The labour market remained in good shape in March with the unemployment rate below 4 per cent, the employment-to-population ratio remaining close to record high levels, and an increase in hours worked," she said.

"A gradual easing in the strength of the labour market is still expected as higher interest rates continue to flow through the economy," she said.

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