Unemployment And The Rate Of Inflation

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.

The more Americans employed means we as a nation are experiencing economic growth. However, if there is a high unemployment rate this interprets that more Americans are struggling in our economy. There are several types and reason for high unemployment. Though America’s unemployment rate was 5.6%, as of December 2014, every state’s unemployment rate varies for different reasons. America’s unemployment rate has a direct negative impact on our entire nation’s economy and affects individual firms, organizations, and people.

The Depression was a gruesome time where people had worked relentlessly to survive. Unemployment today is as severe as it was in the 1930s, the unemployment rate of today is nowhere near the unemployment of the Great Depression. A pair of economists with the Federal Reserve Bank of Dallas created report called “A Historical Look at the Labor Market During Recessions”. The report is a graph of the WWII Recession, showing that the unemployment rate of a few years ago has past the unemployment rate of the WWII Recession. In 2008 the authors wrote the Unemployment Rate, it’s a report that describes the recessions of the past to the years of 2006 to 2011. The most of the recessions are above or near the average, but the highest recession is the Great Depression.

Suppose you want to show the changes in the unemployment rate in the United States during 2000–2008. The most appropriate chart you would use will be a

When is the last time we experienced deflation (prices actually dropped- you will have to go back a few decades)?

The table 1 and Fig 1 reveal the yearly Mean employment rate for the entire U.S and the state of Texas. In 1948, the unemployment rates was 3.75% in 1948, however, the unemployment rates have jumped to approximately 8.1% in 2012. Similarly, unemployment rates decline

This means that four scatter plots will be constructed, each of which having population as the independent variable and one of the four other variables as the dependent variable. The hypothesis associated with this is to see whether or not the slope is significantly different from zero. Microsoft Excel is used to generate the scatter plots as well as to find the trend line and its slope. The first such scatter plot will be to see if the population can be used as a predictor for the unemployment rate. Again this means that population will be placed on the horizontal axis (independent variable) and unemployment will be placed on the vertical axis (dependent variable). This scatter plot is presented at the top of the following page with the equation for the regression line and the coefficient of determination presented within the scatter plot. The coefficient of determination is sufficiently small to show that there is no significant correlation between state population and unemployment

This Graph shows how the GDP (gross domestic product) in France declines in the year of 1932 which is when the depression had impact on the country. It slowly recovers in the year of 1933 but experiences a moderate fall in the 2 to 3 next years due to industrial and political issues.

Unemployment rates can also be correlated to unemployment. For instance, the lower the unemployment rate the faster it is to pay higher wages essentially causing stimulation in the economy. This is best described by A.W. Phillips, a famous New Zealand economist. Phillips created the Phillip Curve which depicts the theory that an increase in inflation leads to an uptick in the employment market leading to a lower unemployment rate (Phillips Curve). The current unemployment rate as of June 2015 is 5.3% and has been trending down since 2012 (Appendix

The unemployment rate in the United States has improved dramatically over the last two years, from a high of 8.3% in July 2012, to a low of 6.6% in January 2014. In October of 2012, the civilian labor force increased from 578,000 to 155.6 million, labor force participation increased up to 63.8%, and total employment overall rose by 410,000! Since then, the unemployment rate has been falling at a stable rate due to a political push from Washington DC and new employment initiatives. The inflation rate over the last 2 years has been relatively stably, with a few major increases and decreases in 2012 and 2013. It reached a high of 2.3% in June of 2012, and reached a low of 1.0% at the end of 2013. The federal interest rate has remained at a constant .25% over the past few years.

Inflation is an increase in price levels within an economy. Basically it means that you will have to pay more for the same goods. Unemployment is even more straightforward. It means that a person is available for employment but is unable to find employment. Lastly, the unemployment rate, which is the percentage of potential workers that are unemployed, is used to measure unemployment (Mankiw 1992).

This graph shows that although there appears to be no direct relationship between GDP and unemployment until after around 1986, a correlation begins after this point. As we would expect to see, GDP increases as the rate of unemployment falls and vice-versa. Unemployment has been increasing since 1970 and continued until around 1986, eventually peaking with very high rates of nearly 12%

It is known that the UK central bank has given more attention toward inflation rate than unemployment rate. Due to the recession in year 2008, the quantitative easing has been implemented and both inflation and unemployment rates target have been achieved. Recently, the Monetary Policy Committee (MPC) has voted to maintain the interest rate at 0.5% to attain price stability and to focus on maintaining inflation rather than unemployment. Contradictory, this has subsequently led to a downward trend of the unemployment rate. The unemployment rate is not too high compared to other countries but they are still an issue that needs to be acknowledge. The government may tackle the issue by adjusting the target for inflation and unemployment that will bring UK economy to its full potential.

Research on the impact of inflation to employment rate is based on Phillips Curve Theori, that said when the unemployment rate is high, the inflation rate is low, and vice versa, if the unemployment rate is low, then the inflation rate is high.

Discuss the role of government policy in reducing unemployment and inflation. In your discussion make use of the diagrammatic representation of the macroeconomy developed in lectures in Term 2