What is the cause of unemployment rate in the United States of America between 2006 and 2010.
My name is Alex. I am a music major. I am taking economics and it is a very difficult subject. I am writing a paper on unemployment and I've been doing research for 2 hours. I feel extremely irritated because I'm stuck. Unemployment is such a broad topic.
Please help me.
Does the stock market crash, bank and mortgage overload, and the auto industry have any ties with unemployment?
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I am not certain you will be able to identify one particular cause. All of the reasons you indicate are interrelated to one another and have conspired to cause the crisis of employment that is present in America today. The stagnation and slow down of the economy in this time period helped to stem the creation of jobs and this played into a low level of national economic growth, which is a challenging element in garnering more jobs. I think that in the end, you would be well set by examining how the multiple forces you identified helped to slow down the pace of the economy and how this slow down stopped the development of jobs. At the same time, I think you can also examine how many companies during this time period had to shed jobs and cut down employment numbers in order to stave off financial ruin or had to do so because of financial ruin. The high level of unemployment in the last five years was not only because of lack of job creation, but also as a result of economic contraction. Analyzing both forces might help deliver a rather powerful statement of the current economic situation with regards to unemployment.
Hard to give you a detailed answer in 90 words of space, but the short answer to each of those is yes they did have an effect on unemployment. The stock market crash caused trillions in assets to evaporate, from reputable and major companies, which denied them those funds to invest in their companies - new branches, new factories, etc. tend to be put on hold when the stock market it is in a correction phase.
The bank and mortgage meltdown led to a tightening of the credit markets, so that even small businesses with good credit could not get the short term operational loans they depended on. Many of them went under, and small businesses employ most of America. It also put a double hit on home construction, which was already in trouble when the bottom fell out of home prices and foreclosures went through the roof. Now people with good credit had trouble getting loans to finance new construction.
The auto industry is a bellwether industry in that it employs, directly and indirectly, hundreds of thousands of people. When auto sales slumped, or when those jobs were outsourced to other countries, it had a direct effect on unemployment. This reality, along with other factors, led to the GM bailout by the government.
See? More than 90 words. Hope that helps.
Certainly, all of that stuff has to do with unemployment. Those are some of the major reasons that unemployment today is so much higher than it was a few years ago.
In order for unemployment to stay low, you need to have aggregate demand from consumers and you need firms to be willing and able to hire. Both of these things went away some because of the things you mention.
For example, as the financial crisis happened, houses started to lose value. That led to the construction sector contracting. This was because house prices were too low and that led to a reduction in the supply of housing. As supply of housing went down, the workers who constructed those houses lost their jobs.
In addition, as banks became less willing to lend, businesses became less able to borrow in order to expand or even to keep their regular levels of employment up.
(I AM TALKING IN GENERAL)
There are many different possible causes of unemployment, and unfortunately for governments, it is never easy to identify which is the most important and what to do about it. The causes of unemployment can be split into two main types:
The first cause of unemployment (demand-side) is simply a lack of aggregate demand. When there isn't enough demand employers will not need as many workers, and so demand-deficient unemployment results.Unemployment caused by supply-side factors results from imperfections in the labour market. A perfect labour market will always clear and all those looking for work will be working - supply will equal demand. However, if the market doesn't clear properly there may be unemployment. This may happen because wages don't fall properly to clear the market.
One final cause of unemployment which tends to be discussed less but is no less important, is changes in the workforce. The workforce is made up of people who are of working age and not currently in full-time education. Their number will change with the demographic (age) structure of the population. If there is a baby-boom (a rapid increase in the birth rate) then these people will become of working age between 16 and 21 years later. They then join the work-force. If there are the same number of people retiring from the work-force at the other end, then unemployment will stay the same.
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