Unemployment in the United States


Today, in virtually all nations across the globe, various key markers determine the success or otherwise of the regime in the eyes of the ordinary citizens. Such factors include its ability to provide essential services such as health, proper infrastructure, ensure food security, education, and jobs. Perhaps the creation of employment is considered by many as an extremely critical aspect because when a majority of the citizens have jobs, they can solve the other functions. Governments that are unable to provide employment for their citizens are to a large extent deemed to have failed. In recent times, the problem of unemployment has been creeping up in America’s economy, and it is increasingly becoming a thorn in the flesh of the government. This macroeconomic issue will be the primary focus of this paper. The paper will extensively define the unemployment, describe how it is affecting the economy of the United States, examine the strategies that both the government and I would use to solve this problem.


The word macro means big or large and thus the term macroeconomics focuses on the big economic picture and in particular how the overall economy performs. It is distinguished from microeconomics which deals with the minor economic issues that affect different sectors of the economy such as consumers, investors, and businesses. The four main macroeconomics issues include employment, inflation, economic growth rate, and the business cycle. This paper will restrict itself the discussion of unemployment.


What is Unemployment?

From a general perspective, unemployment refers to the lack of jobs. For economists, however, this definition is not complete. To them, unemployment denotes the number of persons in a country who are willing and able to work and are actively looking employment opportunities but are not actively engaged in any income generating opportunities. The unemployment rate is the standard measure of unemployment in an economy, and it refers to the number of the unemployed persons divided by the number of people number of people in the labor force. The number people in the workforce comprise both the employed and the unemployed.

Economists distinguish between three kind of unemployment including frictional, cyclical and structural. Frictional unemployment is least of any government worries because it arises where people are changing jobs. Technically, it occurs as the natural job-seeking process where graduates from learning institutions search for jobs or individuals quit their jobs to find new ones. Cyclical, on the other hand, poses quite a challenge to economic policy makers and it occurs where the economy falls into a recession. In the tourism industry, for instance, most hotels are in active business during the summer as many people are on holiday. During other times, business is quite slow, and some employees lose their jobs. This kind of job-loss is an example of cyclical unemployment. Finally, structural employment occurs where there is a mismatch between the job requirements and the skills possessed by the worker. It can, for example, occur where technology renders a person’s skills obsolete such as a supermarket cashier being replaced by a checking out machine.

Unemployment in the United States

According to the Bureau of Labor Statistics, as at March 2016, the rate of unemployment in the United States stood at 5%. The statistic encompasses all individuals over the age of 16 years who are active in the labor force. A poll by Gallup that sought to identify the biggest issues among Americans in 2016, listed unemployment among the top 5 main pressing issues just below terrorism, gun control, and dissatisfaction with the government. Although the current rate is not the worst in the history of the US, the government can do better in dealing with the situation.

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There are a variety of reasons for the current high unemployment rates in the United States. During the 2008 financial crisis, many businesses performed poorly and as a result, many jobs were lost. This phenomenon occurred throughout the globe and the US economy especially the small business where a majority of the citizens are employed was hardest hit. The US economy is still experiencing the aftershocks of the recession. Another factor leading to major job losses in the US is the increasing tendency of US firms to outsource jobs. A lot of companies including blue chips such as Apple Inc have some of their manufacturing centers in other countries where the factors of production such as labor are relatively cheap. Similarly, several call centers by major companies moved to Mexico after the entering into force of the NAFTA. The emergence of China as a global economic powerhouse but with cheap labor has prompted some manufacturers to move there. Advancement in technology has also seen massive job losses in various industries. Kottasova in an article in CNN Money notes that many white-collar and administrative jobs are continually losing out to technology. It paints a grimmer picture whereby it forecasts that as many as million jobs will be lost in the next five years due to advancement in technology during an era she terms as the fourth industrial revolution.

Unemployment has adverse effects on the society as a whole. It has far fetching costs to the individual, society and the economy at large. To the individual, it leads to a lower standard of living and thus diminishing his or her quality of life. Where a person remains unemployed for a long period, he or she loses critical skills and thus eroding the value that was spent in training him or her. To the society, unemployment leads to an increase in social evils. Unemployed people engage in vices such as prostitution, trade in illegal drugs, and criminal activities as an alternative source of income. The overall economy even suffers more because of unemployment. Where it is high, the government incurs more costs in the form of unemployment benefits such as food assistance and Medicaid.

Government Solutions

Job creation is the main solution for unemployment. A decent growth rate of about 6-7% is sufficient for to create jobs but not enough to solve the challenge altogether. To keep this problem to the minimum possible level governments have two strategies at their disposal. The US government has adopted both including the fiscal and monetary policy. The monetary policy entails manipulating (usually lowering) the interest rates to encourage businesses to borrow more to boost trading activities and thus create jobs for people. The fiscal policy, on the other hand, includes reduction of taxes and increased government spending on the economy to stimulate trading activities. Lowering of taxes has a similar effect as cutting the interest rates while government spending entails doing projects that will lead to job creation such hiring of workers to provide it with certain services.

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Alternative Strategies

Besides solutions by the government, there exist other strategies that can help to solve the unemployment question. Strengthening the economy to deal better with economic crises is one of the strategies. Understandably, the global economic recession was a consequence of weak lending policies of key firms in the financial industries. A majority of the borrowers defaulted, and cash crises set it. This affected many other smaller firms, and jobs were lost as a result. Thus putting in place better policies to deal with incidences such as recessions will help in go a long way in preventing massive loss of jobs. Also, the government should make it easier for both individuals and businesses to relocate to resolve the structural unemployment. By providing information to the citizens on where better job prospects exist can induce people to relocate. Likewise, tax holidays and other incentives in areas where unemployment rates are high may encourage businesses to relocate to those areas thus creating jobs for the locals.


This paper discusses unemployment as a macroeconomic challenge in the US. The paper defines unemployment and outlines the three key types of unemployment including frictional, structural and cyclical. The paper evaluates the nature of unemployment in the US and discusses its effect. Some of the solutions used by the government to cure unemployment include lowering the interest rates, cutting down taxes and increased government spending. Other alternatives that may be employed include strengthening of the financial sector as well as enabling businesses and individuals to relocate easily in response to structural unemployment. The government is without doubt the most crucial player in the economy and hence its role cannot be disregarded in solving the unemployment challenge in future. If my proposed strategies are adopted, they can in future be used alongside the governments’ to curb unemployment. My strategies are more targeted towards solving it from a futuristic perspective whereas the government’s strategy is more short-term oriented. If both strategies are implemented concurrently the incidences of unemployment will significantly reduce.

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