One of the things that is not being talked about nearly enough in these tough economic times is both a cause and a byproduct of the financial crisis. While everyone spends their time focusing on the shrinking credit market and people write articles about how bad the stock market is faltering, few people have mentioned unemployment.
In many areas of the country, unemployment is as high right now as it has ever been. The
national unemployment rate is rising, as well, which is not a good sign for those people who are entering the market right out of college. Jobs just arent there right now, as more and more companies do their best to tighten up and save money.
The Current Unemployment Situation
Right now,
unemployment is on the rise at right around 6.7%. This number might not seem like a big one, but even a couple of percentage points added to the unemployment rate in America can make a huge difference. For comparisons sake, know that the country normally operates with an unemployment rate just below 5% when economic times are good.
With so many people in the American workforce, this 1.7% difference means in reality that millions of people have lost their jobs over the last couple of years. The frightening thing about this statistic is that it doesnt appear to be stopping anytime soon. More and more jobs are being lost each month and as long as the economy continues to slump, more folks will be looking for work as the rate heads higher and higher.
What can a good unemployment rate do for the economy?
When the unemployment number is somewhere in the 5% range, the economy has legs that carry it to good places. This current economy works when people have expendable income to throw around. They have the money to not only pay their mortgage and keep their lights on, but also to go down to the mall and pour dollars into the storefronts there.
When people start losing their jobs, they quit
spending money. Even people that have money are not willing to spend it right now because they fear that their job could be next. A rising unemployment rate has a way of crippling the American economy and it also hurts the markets. A fearful group of consumers is not a good thing if you work on a democracy.
A solid unemployment rate will help people have the confidence to spend their money. They will get back out there and support the businesses, who in turn can hire more people. It is a cycle that needs to be well-oiled in order to run the way that it should.
Where are jobs being lost?
The first sector that most people mention when talking about layoffs is the financial sector. Firms are cutting back their staff because clients are not investing as much as they used to be investing. Wall Street is having a hard time right now, so people who depend on it for their livelihood have been thrown out in the cold, at least for a little while.
People who work for banks have been the most at risk in this down economy.
Jobs are also going away in the entertainment industry. The Arizona Diamondbacks baseball team recently laid off 10% of its front office staff, a cut of 31 employees. When people dont have money to spend on their activities and fun, things like sports and the movie industry have a tendency to struggle. The biggest job cuts are coming there, as money is starting to get really tight.
How does unemployment hinder a potential economic recovery?
These things go hand in hand. As the economy improves, more jobs will be available and unemployment will be down. Likewise, having more people in the workforce is only going to be good for the economy. Until the economy turns around, there wont be too many more jobs available. Its a difficult situation because as long as the markets are in a funk, not too many businesses are going to be opening their arms to new workers.
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