The rate of unemployment levels is known to move in a cyclical manner, largely being influenced by the current business cycles. Nonetheless, other factors such as demographics developments and labour market policies may influence both the short and long-term unemployment evolution as well. According to the article on Labour markets: Did the natural rate of unemployment rise? By Mary Daly SAhim and Robert Valleta, the sharp increase in the United States rate of unemployment associated with the 2007-2009 recession is greatly unprecedented during the era after the World War 2. However, unlike the post world war rapid market recoveries, the rate of unemployment after this recession had declined by only 1.7% points. The authors further explains that, due to these reasons, the unemployment rate has consistently remained high relative to various historical relationships. In this paper I will expound on various types of unemployment such as the structural, frictional and natural employment and further explain on the effects of the financial crisis to America.
In regard to natural unemployment, this is simply a situation whereby an economy is practically full of employment with regard to the aspect of utilization of its labour and the supply of various resources thus allowing for inevitable. Minimum or temporal unemployment adjustment. This a situation that occurs in a healthy market because at any given time, workers are always leaving and joining other jobs in their quest to finding a better job. On the other hand, structural unemployment and frictional unemployment are normally regarded to being the natural bi-products of an expanding economy. Structural unemployment occurs because, as long as the economic needs of a particular country keeps on changing and the workers skills also change, there is bound to be a miss-match between job availability and the required job skills. Therefore, even I situations where jobs are accessible, there is usually a serious disconnect between what employers require and what workers can deliver, or what the employers are ready to offer to workers and the workers expectations. Regarding frictional unemployment, this type of unemployment occurs because at times, a worker may just become bored or disinterested with their current occupation, or they relocate to a different location or for various personal issue such as sickness or pregnancy thus forcing them to leave their current jobs before securing another job. This type of unemployment ultimately drops out these individuals from the labour force.
According to the article, there are various factors that the American financial crisis has led to the emerge of natural unemployment. One of these issues is that there have been a mismatch between the characteristics of the job openings ranging from skills to location and the general characteristics of the unemployed. In addition, they explain that, the availability of the extended unemployment insurance benefits which would have otherwise reduced the intensity of job search. These authors conclude that, although the rate of natural unemployment has risen to a moderate degree over the past few years, there has been a substantial slack evident in the labour market. The financial crisis has therefore changed the American economy by largely altering the rate of natural unemployment.
According to the authors of this article, frictional and structural unemployment are terms which are usually used synonymously. They underlie the natural rate of unemployment. The article uses the model of equilibrium frictional unemployment to assess the numerous factors that affects the unemployment rate in America and with regard to the financial crisis. Through this model and the use of a graph, these authors concludes that the probability for filling a job position in the American economy after the financial crisis of 2007-2010 rises as the rate of unemployment increase. In Conclusion, the a high rate of unemployment in the midst of an ongoing GDP growth and numerous job openings has in many occasions raised concerns that he general rate of structural and natural unemployment has been on the increase in the US. This therefore raises the imperative policy issues in the fiscal stabilization as well as the short-run monetary approach. In general, this article manages to clearly expound on the several ways that the financial crisis has had an effect to the America economy in particular to the aspect of unemployment.
Bibliography
Daly, Mary C., Bart Hobijn, Ayşcegül Şahin, and Robert G. Valletta. "A search and matching
approach to labor markets: Did the natural rate of unemployment rise?." The Journal of Economic Perspectives 26, no. 3 (2012): 3-26.
