News flash:
As indicated below the current unemployment rate (May 08) was announced this morning.
Unit 2 (next week) we will consider the big 3 macroeconomic problems:
Economic Growth
Inflation
Unemployment
This news release clearly indicates the current conditions for the first and last problem. These 3 macroeconomic problems are closely related as we will see next week.
This latter idea is one you will read about next week in chapter 15 the chapter on unemployment.
The natural rate of unemployment consists of seasonal unemployment, frictional unemployment (voluntary unemployment as workers switch jobs, go back to school or quit because they dislike their job or boss) and structural unemployment (also knows as layoffs due to changes in the way a product is produced, example, less bank tellers today than in 1980 due to ATMs). Well a free economy will always have seasonal unemployment (even command economies cannot control the weather) and a free economy will always have frictional unemployment as people change jobs in search of different working conditions and a free economy will always have structural unemployment (think of buggy whip manufacturers, typewriter manufacturing workers, VHS manufacturing jobs) as businesses are constaintly changing to react to their own internal cost conditions (produce more efficiently and productively) and to respond to changing demand conditions as consumer express their preferences.
Economists estimate that, in the US economy, the natural rate of unemployment is between 4 - 6 per cent. So now, read the unemployment report below which, is admittedly negative, in a historical context with the analysis above.
ECONOMIC REPORT
Jobless rate soars to 5.5% in May
Biggest rise in unemployment in 33 years; payrolls fall 49,000
By Rex Nutting, MarketWatch
http://www.marketwatch.com/news/story/jobless-rate-soars-55-may/story.aspx?guid={6B9B2E20-06E8-4FC0-AD5A-3029D5057F89}&siteid=yahoomy
WASHINGTON (MarketWatch) -- The U.S. unemployment rate jumped by half a percentage point in May -- to 5.5%, the highest since October 2004 -- on the biggest increase in seasonally adjusted unemployment in 33 years, government data showed Friday.
Nonfarm payrolls fell by 49,000 last month, the Labor Department reported, marking the fifth consecutive decrease and in line with expectations of economists. See Economic Calendar.
The economy thus has lost 324,000 jobs this year, according to the government's survey of some 400,000 work sites. Job losses in March and April were revised lower by 15,000.
Unemployment rose by 861,000 in May to a total of 8.5 million, according to a separate survey of about 60,000 households. It was the biggest one-month increase in unemployment since January 1975. Read the full government report.
The 0.5-percentage-point increase in the jobless rate was a shock, as economists expected a much smaller gain to 5.1%. It was the biggest percentage-point gain in unemployment since 1986.
If you have a job, you might consider the topic of frictional unemployment and whether you want to quit.
Greg
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1 comment:
That is crazy that the unemployment rate jumped a whole .5% point. What do you get from all of this? Do you feel that this is a spell of Frictional Unemployment or Structural Unemployment? I feel that a lot of companies are cutting back and because of the cut backs they are laying off employees. The article says that this was the biggest percentage-point gain in unemployment since 1986. Do you believe we are in a recession? If so is it one more or less severe then the recession in the 80’s. In the article it says that the nonfarm payrolls fell by 49,000. Which jobs would this be referring to mostly, and is there a specific state that is losing more jobs than the others or specific type of business?
I am a realtor and I have seen many realtors try to find other jobs currently because the housing market has taken a big hit and also I have seen many builders finding other jobs as well, would you consider that structural unemployment? I am excited to learn more about this in your class. I feel that this will be a good thing for us in the long run and that the market will eventually take a turn for the better just like it always has.
Elliot Caldwell ECN211
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