Sunday, December 5, 2010

Critique: Are Jobs Coming Back? Signs Point to Yes

Last Friday, the Department of Labor's monthly unemployment report came out. The report was very humbling for many politicians and job seekers who were predicting an increase in jobs and decrease in the unemployment rate. However, against many economists' predictions, who at the beginning of the month of November were anticipating a job increase of about 250,000 jobs, only 39,000 jobs were created over the period. However despite the incerase in gross jobs in November the unemployment rate actually jumped from 9.64% to 9.82%. The reason behind the unemployment jump despite the increase in jobs, is due to more indivuidauls joing the labor force, who had previously not been seeking employment. In order to be counted as a member of the labor force, a person must be actively seeking employment and be 16 years or older. The 9.82% mark is the highest the figure has been since April, after figures had remained steady throughout the previous months at 9.6%.
Unemployment can be broken down into three subdivisions: frictional unemployment, structural unemployment, and cyclical unemployment. As a rule, frictional unemployment hovers around 4.5%, as these are just the people who are in between jobs, recession or no recession. Structural unemployment arises when there is a mismatch in skills. However I do not believe structural unemployment is playing a major role, but cyclical unemployment is I believe. Cyclical unemployment is directly related to the current business cycle, and one can see that cyclical unemployment is in effect, due to the massive amount of layoffs employers are having to make.
I think that the main reason that we saw such an increase in the labor force in the month of November was because of the expiration of the Federal Extended Unemployment Benefits at the beginning of December. With the 99 week extended benefit plan coming to an end at the beginning of the month, I presume that the labor force will peak in the coming month. This could mean that if Congress cannot pass a temporary extension to the benefits, then the unemployment figure could go through the roof. This is because individuals are typically given benefits for up to 27 weeks in a normal economy, but due to the recession that the country has been fighting over the past two years, benefits were extended over 70 more weeks. to collect insurance the unemployed person must be actively seeking work, so these individuals will be counted in the labor force either way, however other family members will most likely be entering the labor force. This is the only practical option for families who need to bring home money, and have family members whose unemployment benefits have recently expired. So I would presume that teenagers and otherwise stay at home moms may be making an entrance into the labor force in the coming month at a greater rate than jobs are being handed out at, which means that another jump in unemployment may be likely.
However because it is December and with the holidays coming up, many temporary retail jobs will be opening up, which might mitigate a jump in unemployment, however last year the unemployment figure stayed the same at 10.0% between November and December.

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