Unemployment: Recovering or Not? Term Paper Example

Introduction

The past financial crisis became a good test to the overall stability of the economic relationships in the U.S. Financial and banking institutions, large and small companies, entrepreneurs and employees had to develop new strategies and solutions to survive the difficult times. The growing unemployment became the distinctive feature of the American economic reality. The number of those who collect unemployment benefits constantly increases. The Bureau of Labor Statistics claims that the rates of unemployment in July did not exceed 9.5 percent. That, however, does not mean that the American economy is recovering. Today, the employment situation in the United States resembles a horror movie, and it is high time economic policymakers addressed the realities of the current economic crisis, to improve the economic situation and to increase the number of available jobs.

That the past financial crisis marked the beginning of the new stage in the development of economy in the U.S. is difficult to deny. Today, the growing unemployment has already become the definitive feature of the American economic reality.  More and more people are losing hope to find decent employment. The Bureau of Labor Statistics often serves the basic source of information about unemployment. According to BLS, both the number of unemployed people in the U.S. and the rates of unemployment in July did not change: 14.6 million people in America were unemployed; the unemployment rate was at 9.5 percent. The rates of unemployment among the major worker groups did not change, too: 9.7 percent of adult men and 7.9 percent of adult women were claimed to be unemployed in July (BLS). Teenagers were, probably, the most problematic group, with 26.1 percent of them being unemployed (BLS). Compared to whites with 8.6 percent of the unemployed, blacks and Hispanics were in a more serious situation, with 15.6 and 12.1 percent of the unemployed, correspondingly (BLS). The number of the long-term unemployed in July did not change and was at 6.6 million (BLS). Here, long-term unemployment means being jobless for the period of 27 weeks and more (BLS). In July, long-term unemployment made up almost 45 percent of all unemployed persons in the U.S. (BLS). The civilian labor force participation was as high as 64.6 percent (BLS). Since April, this ratio had declined by 0.6 percent (BLS). The number of those who were employed part-time for economic reasons (involuntarily) did not change essentially and reached over 8.5 million in July (BLS). Meanwhile, there were more than 1 million of discouraged workers in July – those, who stopped looking for a job because they did not believe any jobs were available for them (BLS). The statistical information from the Bureau of Labor Statistics creates a picture of stability. There seems to be nothing tragic in high unemployment rates. Moreover, these data create an impression that the stability of the unemployment rates and the absence of the negative unemployment tendencies mark the beginning of economic recovery. The picture, however, is too good to be true.

In reality, the United States is not even close to what is usually called “recovery”; on the contrary, the current employment situation resembles a horror movie and is likely to get even worse. The fact is in that

“the employment situation in the United States is much worse than even the dismal numbers from last week jobless report would indicate. The nation is facing a full-blown employment crisis, and policymakers are not responding with anything like the sense of urgency that is needed.” (Herbert)

In other words, the statistical data from the Bureau of Labor Statistics do not reflect the real unemployment situation. More importantly, such information does not give the U.S. policymakers any chance to evaluate the situation objectively. To be fully aware of what is going on with unemployment, one needs to look beyond the official statistics. First, government workers in the U.S. are facing unbelievable unemployment threats: according to Herbert, 143,000 temporary Census workers and 48,000 government employees have already lost their jobs. Second, the BLS report does not reflect the 181,000 workers, who had already left the labor force because they no longer hope to find any job (Herbert). Over the past three months, almost 1,155,000 workers left the active labor force and are no longer considered unemployed (Herbert). Should those unemployed had been counted as a part of the currently unemployed population, the rates of unemployment in July would have exceeded 10.2 percent (Herbert). Meanwhile, the Bureau of Labor Statistics continues reassuring the common population that the situation with unemployment is stable and in no way threatens the stability of the American economy.

Traditional unemployment measures pose another problem. Here, the so-called civilian employment-population ratio could shed the light on the current state of unemployment in the U.S. Olsen is correct in that the analysis of the civilian employment-population ratio shows how difficult it will be for the U.S. to pull out of the current crisis. The civilian employment-population unemployment ratio is different from traditional unemployment measures and provides a better insight into the current unemployment tragedy. The traditional unemployment rate measures the percentage of those who actively seek employment but do not have one, whereas the civilian employment-population ratio measures and reflects the percentage of those, who currently have job, regardless of whether they are seeking a new job or not (Olsen). This distinction is important, because the state of economy always affects individual desire and willingness to look for a job (Olsen). The worse the economic times are the fewer workers will tend to seek jobs (Olsen). On the contrary, good economic times and economic stability encourage employees to seek better employment opportunities: economic stability is often associated with the rapid population increase which, consequentially, leads to the growing number of working-age individuals who want to find a job (Olsen). The civilian employment-population ratio shows that the United States is suffering the worst drop in employment since WWII: compared to 63% of the employed in 2007, only 58.4% of Americans currently have jobs (Olsen). The official unemployment rate does not change and is stable at 9.5%; meanwhile, the civilian employment-population ratio constantly declines: only 58.5% of the civilian population were employed in June, compared with 58.7% in May (Olsen). Taking 238 million as the average number of civilian adults of working age in the U.S., over 12 million jobs have been lost since 2007 (Olsen). No other recession in the past century witnessed job destruction of the scale and pace similar to that in the last year (Olsen). Obviously, the United States is still too far from the beginning of the economic recovery, and American policymakers do not seem to have any ideas or strategies to help the nation to tackle with the most serious unemployment challenges.

How long it will take the United States to recover its economic health is difficult to predict. In the current situation and with the lack of effective economic strategies, the American economic future looks rather grim. Hilsenrath performed a profound analysis of the previous financial crises and found out that, once grown as a result of a serious financial shock, unemployment rates never get back to their pre-crisis lows. In the U.S., unemployment hit a low of 4.5% in 2007 and, as Hilsenrath shows, employment never recovered to the pre-crisis rates. The slow growth of GDP adds its share of complexity to the situation (Hilsenrath). Clearly, it will be extremely difficult for the United States to recover and catch up with the previous rates of economic and financial growth. Long-term unemployment has already become a tradition. Policymakers are too inactive to take radical economic decisions. The United States is no longer heading toward the failure zone, because the failure zone is here and threatens the future of the whole American society. Given what Hilsenrath describes in his article, traditional economic cures are unlikely to be effective and justified. The seriousness of the unemployment situation calls for developing radically new initiatives and decisions. A new economic vision must be developed, to increase the number of available jobs. There is no way to stop the growing unemployment and the reduction of available jobs other than to develop a completely new economic policy.. Quick fixes are no longer relevant; they are more likely to impair than to improve the situation (Hilsenrath). The United States will be sinking in the deep river of the unemployment crisis, unless it realizes the seriousness of the situation and develops a sense of urgency in addressing the current unemployment complexities. The sooner these policies are developed the better their economic effects will be. Today, it is still too early to speak about recovery.

Conclusion

The past financial crisis became a good test to the stability and effectiveness of the economic relationships in the United States. Unemployment became the definitive feature of the American economic reality. According to the Bureau of Labor Statistics, the rates of unemployment in July did not change and were at 9.5%. Unfortunately, the picture of unemployment stability is rather misleading. The real unemployment situation in the U.S. resembles a horror movie. The number of available jobs constantly decreases. Thousands of working age individuals leave the labor force, because they no longer believe there are any jobs available for them. How long it will take the U.S. to improve the situation is difficult to predict. As of today, policymakers are still inactive. Quick fixes will hardly work and are likely to make the situation even worse. A new economic vision must be developed, to address the realities of the current employment crisis. Meanwhile, it is still too early to speak about recovery.

Works Cited

BLS. “Economic News Release.” Bureau of Labor Statistics, 6 August 2010. Web. 28 August 2010

Herbert, B. “The Horror Show.” The New York Times, 9 August 2010. Web. 28 August 2010

Hilsenrath, J. “After Crises, Slow Income Growth and High Unemployment.” The Wall Street Journal, 27 August 2010. Web. 28 August 2010.

Olsen, H. “Unemployment: What Would Reagan Do?” The Wall Street Journal, 10 August 2010. Web. 28 August 2010.