|Address the following questions:|
How is unemployment calculated, and what is and is not included?
What were the unemployment numbers for the latest three quarters in the USA?
Why is unemployment mentioned in business news so often and used as an important metric for our economy?
What might cause the unemployment numbers to be questioned from an accuracy standpoint and a relevancy perspective?
How is unemployment impacted by the phases of the business cycle?
Support your response with at least one scholarly and/or credible resource in addition to the text
Unemployment is a term used to refer to when an individual actively seeking a job cannot find work. The unemployment rate is calculated by dividing the number of unemployed persons by the number of persons in the labor force and then multiplying the figure by 100. Unemployed includes people who are not in a paid job but are actively looking for work. The unemployment rate calculation excludes people studying, caring for children or family members voluntarily, retired, or permanently unable to work. According to Organization for Economic Co-operation and Development, the U.S.’s last three quarterly unemployment rates were as follows: 4.3% in Q4 2021, 3.9% in Q1 2022, and 3.6% in Q2 2022 (OECD, n.d.). The unemployment rate is mentioned in business news often because it dictates labor supply and demand in the corporate world. It also informs the government policymakers on the economy’s performance because employment is vital to economic growth. A low unemployment rate is healthy for an economy because it generates income and revenue for expenditure and supports economic growth.
Unemployment numbers can be questioned from an accuracy standpoint and a relevancy perspective because it often ignores the discouraged workers, fails to separate the part-time from full-time workers, and fails to account for those collecting benefits but not seeking jobs. “It is inappropriate to exclude discouraged workers from the labor force just because the searching became so stressful that they gave up looking for work; they realized that “seeking” was in vain” (Komlos, 2021, p. 53). Business cycles are the repetitive expansions and contractions of activity within economies. Unemployment increases during business cycle recessions and decreases during business cycle expansions. During the expansion, more jobs are created as new and existing firms perform better, which lowers the unemployment rate, all things constant. Still, such expansion could attract immigration which initially increases the unemployment rate in the home country (Lozej, 2019). During a recession, the unemployment rate rises because output declines to cause firms to either shrink or shut down.
Komlos, J. (2021). The Actual U.S. Unemployment Rate in 2019 Was Twice the Official Rate, and the Phillips Curve. Challenge, 1–24. https://doi.org/10.1080/05775132.2020.1863547
Lozej, M. (2019). Economic migration and business cycles in a small open economy with matching frictions. Economic Modelling, 81, 604–620. https://doi.org/10.1016/j.econmod.2018.07.012
OECD. (n.d.). Unemployment Rate: Aged 15-64: All Persons for the United States. FRED, Federal Reserve Bank of St. Louis. Retrieved August 10, 2022, from https://fred.stlouisfed.org/series/LRUN64TTUSQ156S#
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