Unemployment Nation

Unemployment Nation from Time Vol. 174, {pages 26-32}

No. 11

(September 21, 2009)

Okun’s law, first resolved by Arthur Okun in 1962, says that “when the economy grows, it produces jobs at a predictable rate, and when it shrinks, it sheds them at a similar pace.” According to this, the United States should be at an unemployment rate of 8.5%, not nearing 10%. Our American economy is shedding jobs faster than Okun’s law says it should. The United States hit an unemployment rate of 9.7% in August, pushing us ahead of Europe, with 9.5%. According to the Bureau of Labor Statistics, the economy has shedded 7,000,000 jobs from December 2007 to August 2009, a 5% decrease in the total number of jobs. The United States hasn’t had such a drop since the end of World War II. The state of Minnesota has an unemployment rate of 7.8%, which is why we will not be part of the ‘Jobless Benefits Extension’ bill considered by Congress. This extension bill will only apply to 27 states and the District of Columbia, where the jobless rates are 8.5% or higher. The bill would extend jobless benefits another 13 weeks, since the federal extension of unemployment benefits are set to expire at the end of this year.1 Although our unemployment rate is 9.7% nationally, it appears to be lower in the South and higher in the North. Metro areas with the highest unemployment rates include Detroit, MI (at 17.7%), Riverside, CA (at 14.3%), and Las Vegas, NV (at 13.1%). Metro areas with the lowest rates include Oklahoma City, OK (at 5.9%), Washington, D.C. (at 6.2%), and Virginia Beach, VA (at 7.0%). The highest unemployment rates by industry include furniture-manufacturing (at 22.5%), construction (at 16.5%), transportation equipment-manufacturing (at 16.2%), and administration and support services (at 15.8%). Right now, researches are looking at the economy and unemployment, predicting what may happen as we go on. Analysts are expecting businesses to be reluctant to hire employees until they are sure and convinced that the economy is whole again or at least on a path to recovery. Private economists, and the Federal Reserve, expect it to top 10% by the end of 2009.2 Other economists expect it to top 10% in 2010.3 Either way, it looks like the United States’ unemployment rate will top 10%, sometime or another. All this is important because unemployment effects, not only the person and their family, but it also effects everyone around them. It effects society. It effects the economy. When someone loses their job, that family typically cuts back on expenses. Therefore, businesses are not making the profits they used to be making. Because of this, those businesses have to lay off workers and cut back on their own expenses. As unemployed people and businesses cut back on such expenses, less money is flowing around in the economy. And to top all of this off, President Barack Obama says he expects unemployment to be a “big problem” for at least another year. However, Mr. Obama says that he is confident the economy will come back stronger than ever.3