The Decline in the Rate of Unemployment Is Due to Adverse Factors in the United States Economy

Better Essays

Introduction In the Wall Street Journal dated September 6th 2013, an article titled, ‘Unemployment Drops for the Wrong Reasons’ describes how unemployment has dropped in the United States based on the latest Bureau of Labor Statistics population survey. According to Izzo (2013), there was a drop in unemployment rate to 7.3% by 0.1% in August 2013. This was coupled with a drop of broader measure of unemployment by 0.3% to 13.7%. On closer scrutiny, the drop in unemployment came from wrong reasons (Izzo, 2013). The arguments in the article are that the decline in the rate of unemployment is purely due adverse factors in the US economy. The 0.1% was approximately equal to 115,000 people. The key reason that there was a drop in unemployment …show more content…

While it may be argued that there is no common basis for comparison and hence this methodology of determining trend of unemployment rate is not valid or reliable, Izzo notes that the reports often move in tandem. The opposite directions they have taken are expected and hence validity and reliability is maintained. However, it is an economic general understanding that the definition of unemployed as ‘those actively looking for work at prevailing wage rate but cannot find one’ is rather broad and fluid. Nevertheless, it is surprising to observe that unemployment rate has dropped while employment is not going up. However, the Labor Department concurred with the results from Bureau of Labor Statics and indicated that the broader unemployment rate called U6 showed a decline in unemployment. The definition of U6 or broader unemployment is the rate of unemployment which includes marginally attached labor force. The marginally attached workers/ labor force are those people who not working and are not looking for work but have recently searched for a job. This rate even includes those employed on part time basis who cannot find a full time job. The views of Izzo (2013) depict a scenario where the unemployment rate reduced because the people have lost hope and have dropped out of the boundaries of the definition of unemployed. On a personal view point, the arguments of Izzo on the

Get Access