The Decline in the Rate of Unemployment Is Due to Adverse Factors in the United States Economy

analytical Essay
1364 words
1364 words

In the Wall Street Journal dated September 6th 2013, an article titled, ‘Unemployment Drops for the Wrong Reasons’ describes how unemployment has dropped in the United States based on the latest Bureau of Labor Statistics population survey. According to Izzo (2013), there was a drop in unemployment rate to 7.3% by 0.1% in August 2013. This was coupled with a drop of broader measure of unemployment by 0.3% to 13.7%. On closer scrutiny, the drop in unemployment came from wrong reasons (Izzo, 2013). The arguments in the article are that the decline in the rate of unemployment is purely due adverse factors in the US economy. The 0.1% was approximately equal to 115,000 people.
The key reason that there was a drop in unemployment rate is that the labor force declined by 312,000. In macro economics, labor force is defined as the actual people who are available for work. This includes the employed and unemployed. Retrospectively, the drop in labor force indicates a drop in the summative value of unemployed and employed population. Izzo (2013) posits that the indication of the decline in unemployment was a long term discouragement and loss of hope of the labor force. Consequently, people are not willing to search for work at the prevailing rate and hence cannot be considered as unemployed.
The article indicates that the labor force participation rate in the United States by August 2013 was at its lowest (63.2%) since 1978. This rate has been defined as the ratio of labor force and overall population size in a given demographic cohort (population at the same age bracket). Although it has been reported that the number of jobs in the US economy went up in August, there was a surprisingly significant drop in employed population....

... middle of paper ...

...mendation, a mixed policy approach should be initiated. This comes from the fiscal and monetary policy perspectives. Therefore, expansionary policies should be able to enhance an increased aggregate demand which will offer adequate total revenue on the demand side of the economy. On the supply side, the target should be to initiate policies that stimulate production at low cost. One of the forces that have been identified in the Theory of Effective Demand pioneered by Michal Kalecki and championed by Keynes and his followers is technology. By agitating for better and innovative constructive technologies, the US can be able to remedy the Discouraged Worker Effect situation expressed in Izzo (2013). However, this is seemingly a long term strategy. Being a follower of Keynes, I believe Keynesian policies where the government is fully involved will remedy the situation.

In this essay, the author

  • Explains that the labor force participation rate in the united states by august 2013 was at its lowest (63.2%) since 1978.
  • Explains that the value derived from the above function is the highest possible value that represents job search by a worker. if the upper limit where acceptance of jobs by job seeker, there will be no unemployment.
  • Analyzes how the wall street journal article titled ‘unemployment drops for the wrong reasons’ describes how unemployment dropped in the united states based on the bureau of labor statistics population survey.
Continue ReadingCheck Writing Quality

Harness the Power of AI to Boost Your Grades!

  • Haven't found what you were looking for? Talk to me, I can help!
Continue Reading