How Does Unemployment Affect The Economy

In any economy, no matter whether it is controlled by the government or by free markets, people need to work in order to support it. The government does not generate tax revenue by magic. There have to be people in that economy earning an income to ensure that the government continues to collect taxes. In a free market economy, the same applies because there are some services which only an organized government can supply (such as protection from extra-national threats), but there also those which the people get for themselves because of the working of the markets. In any scenario, unemployment is, at the very least, a drag on the economy, and it can be much worse. This paper examines how the unemployment rate in the United States is underreported, and how that fact effects the sluggishness of the present economy.

While nonfarm and farm investments, final sales of domestic product, real domestic income, and corporation show an increase people are suspicious if the United States is coming out of the recession. Economists predict individuals will continue to increase spending on nondurable and durable goods, but when it comes to services the population is hesitant from the result of the downturn in the housing.

According to economists surveyed by Bloomberg, consumer spending drives about two-thirds of the GDP, and economists expect that spending in the third quarter has been brisk, given relatively high consumer confidence levels. Home-grown demand won’t insulate the U.S. economy from a global slowdown, but it can push the U.S. toward a year of decent growth.

• As previously stated in the executive summary, the United States’ economy is currently stagnating. From week to week we may see a rise in one indicator while there is a fall in another indicator, but none of the rises or falls are drastic enough to have an overwhelming impact on the economy as a whole. Although the economy is not near as strong as it was before the 2008-2009 recession, arguably one of the biggest economic crises of the past decade, there has been much growth and strength throughout the past few years with this year being the first year in which the economy is in somewhat of a holding pattern. I believe, that even with the little growth and movement of the United States economy over the past year, it is still perhaps one of the strongest economies in the world at the moment.

The U.S economy is a mixed economy and it is the largest in the world. It accounts for 17 to 22 percent of the world’s GDP. Consumer spending in U.S accounts for 70% of the national economy. People generally spend on necessities like food, housing and clothes and on buying non-essential goods and services that fall under discretionary spending category. With a huge reduction in gas price and unemployment there is a steady increase in discretionary spending these days. According to U.S bureau of labor statistics consumer spending increased 3.4 percent in 2015 after advancing 4.2 percent in 2014.

The current weak and volatile economic conditions, particularly in the United States and Canada, have impacted consumer spending. These week economic conditions will continue to impact consumer spending and purchasing habits for the foreseeable future. Consumers’

As of June 2013, median household incomes were up $598 month-over-month and $960 year-over-year. According to U.S. Department of Commerce (2013), “wages and salaries, the largest component of personal income, increased 0.5 percent in June after increasing 0.3 percent in May.” Personal expenditure is the vast element to aggregate demand. It is set on a household’s disposable income. There will be a shift to the left on aggregate demand if consumers buy more output at the price level. The current fiscal policy in place as it relates to consumer income states that the government can increase or decrease taxes on household income. An increase in taxes means a decrease in disposable income, because it will take money out of households. The opposite holds true if there is a decrease in taxes, because it will leave households with more money. Disposable income accounts for two-thirds of total demand. Economist had forecast a 0.1% rise, but reports show that spending fell 0.2% in May 2013 when adjusted for inflation. It is suggested that consumers pulled back from spending due to

The Bureau of Economic Analysis showed output in the U.S. increasing at a rate of 2.3% for the second quarter of 2015 (Sharf, 2015). This is a 1.7% increase from the first quarter when real GDP increased 0.6% (Sharf, 2015). Current-dollar GDP decreased 0.2 percent, which is the equivalent of $10.4 billion, in the first quarter of 2015 to $17,693.3 billion (News Release: Gross Domestic Product). The B.E.A. also reports (GDP 2015) that personal consumption has doubled within the first two quarters of 2015 from 1.8% to 3.6%, suggesting that consumer income has also increased alongside GDP.

The Congressional Budget Office is estimating that the economy will continue to grow. Consumption spending will continue to grow, but at a smaller rate. The growth is contributed to the ability to have an increased likelihood to be eligible for a loan. Consumer spending will also increase due to more jobs in order to keep up with an increase in output. Unemployment will have to decrease to keep up with output and prevent shortages, and unemployment will eventually fall below penitential. Inflation will rise the to the increase in aggregate supply and aggregate demand. An increase in employed workers will cause an increase in disposable income that will result in increased spending. In order to slow the inflation rate, the Federal Reserve will

Meanwhile, strengthening activity has also been registered in the service sector: the ISM’s Report on Non-Manufacturing Business also increased significantly in September. Recent readings of live GDP forecasts for Q3, courtesy of the Federal Reserve Bank of Atlanta, have been trending upwards over the past few weeks, the latest being +2.7%. Carrying such momentum into Q4 would, therefore, suggest more labour market tightening, thereby further justifying an increase in the federal funds rate in December. Crucially, both ISM Surveys indicate that price pressures have been rising significantly over the past four months, helping to support Fed Chair Yellen’s view that weaker-than-expected inflation is attributable to transient forces.

sense of pride in the work people did, they wanted to work and didn’t go without a job. The 2 year extended unemployment benefits have actually harmed the United States economy more than it has helped it. Unemployed workers have taken advantage of the generous government benefits. Unemployment benefits should be a short-term benefit to help unemployed workers pay bills in between jobs. The government has extended these unemployment benefits and allowed workers to stay unemployed for up to 2 years. The benefits given out are so generous that unemployed workers are turning down jobs they could actually get hired at because they can earn more income off unemployment benefits. People are unwilling to take what they consider lower paying jobs

9 million Americans are unemployed , There are many different ways to solve unemployment, but to fix any problem you must be willing to work for it.

There is now increasing conviction in the view that Q1’s contraction to US real GDP was, in fact, transitory, as opposed to the onset of a new and slower growth trend. Special factors, such as bad weather, the labour dispute at West Coast ports, and statistical noise were all to blame for the negative outcome. Members of the Federal Open Market Committee (FOMC) are, therefore, relieved to be witnessing a generally better-than-expected tone to US economic data in recent weeks. These include higher automobile sales, although I suspect it will be a struggle to achieve much higher readings in the near future. Meanwhile, initial jobless claims continue to hover at very low levels. Respectable labour demand is now

Consumers are stepping up to the plate, with retail sales climbing by 0.6% in August, the fastest pace in four months. Such an uptick, plus an upward revision in July’s spending, boosts prospects for the economy in the months ahead. Behind this better retail showing, most likely, were declining layoffs, an improving stock market, and lower prices at the gas pump. Breaking the survey down, we saw gains at auto dealers, furniture outlets, building materials stores, and sporting goods retailers. All told, the consumer appears to be engaged as we head into the year’s home stretch.

Money is essential to any individual looking to have a decent lifestyle; labor is the avenue through which this is acquired. The economy goes through various fluctuations in activity causing unemployment to fall, rise, or level out. What this creates is the first type of unemployment, known as cyclical; frictional is the second type, caused by a temporary leave (for whatever reason) by the employee, and structural is the third type, varying with the economic changes in demand. The absence of unemployment at its maximum level is termed full employment, another version of unemployment. The term encompassing the sum of the frictional, structural, and, yet another type of unemployment, surplus unemployment is that of the natural rate of