The US economy has faced a challenging breakdown during the global financial crisis, and the crisis started in the sub-mortgage insurance market has influenced all the American economy.
Graph 1: Unemployment Rate Statistics in the US (Labor Statistics 1)
As can be seen from the graph, the unemployment rate has increased after 2007 in the States up to over 10%. The last unemployment rate announced by the Labor Statistics is 5.1% in 2015. The level of unemployment before the crisis was less than 5% in 2005. Consequently, it is possible to say that the US economy has achieved a recovery in the unemployment after the crisis. However, for providing a relatively better proof whether the US economy has reached a full employment, we need to analyze the change in the structure of the labor market in the US (Hartman 1).
For being able to examine the full employment, we need a definition of full employment. Full employment is defined as the existence of only frictional (temporary unemployment because of the workers who leave their jobs to search for a relatively better one) in the economy. In another word, if there is no structural and cyclical unemployment, this situation is called full employment (Econport 1). However, if the frictional unemployment is relatively more than normal, that might be a reason for an increase in the natural unemployment. The frictional unemployment is expected to be from 4% to 6%.
The US economy has faced a structural break, and that caused a structural unemployment. For instance, many bankers, finance professionals, and automotive industry workers lost their jobs during the crisis. Also, many qualified workers found part-time jobs, and some of them left the labor force because they lost their hopes of finding a good job. Consequently, we observe the labor participation rate has decreased in the US. Also, many experienced and qualified workers left the job market (Jones 1). Depending on this, it is possible to expect that the frictional unemployment increase after the crisis more than the normal level.
The study by Daly, Hobijn, Sahin, and Valetta (14) explain the reasons behind the high frictional unemployment. The reasons are as follow: 1- Labor market mismatch, 2-Extenden unemployment benefits, and 3- Uncertainty in the macroeconomic conditions (Daly, Hobjin, Sahin, and Valetta 14, 16, 18). The labor market cannot create the jobs for the high-quality workers or the labor market is not providing variety of jobs for the workers. Also for the companies, it is relatively more expensive to find new suitable workers for their open positions. The extended unemployment benefits cause a delay for looking for a new job, and the unemployed person prefer staying off for relatively more time, and that increases the frictional unemployment. Finally, the uncertainty is another reason for the high frictional unemployment. The uncertainty makes it relatively more difficult for the workers about getting a job, and for the companies about hiring a new worker. Consequently, these reasons have increased the frictional unemployment in the labor markets, and the natural rate of unemployment has increased.
Works Cited
Bureau of Labor Statistics. "Employment And Unemployment Among Youth Summary." N.p., 2016. Web. 23 Feb. 2016.
Bureau of Labot Statistics. "Bureau Of Labor Statistics Data". N.p., 2016. Web. 29 Feb. 2016.
Daly, Mary et al. "A Rising Natural Rate Of Unemployment: Transitory Or Permanent?". Federal Reserve Bank of San Fransisco. 1-29, 2016. Web. 29 Feb. 2016.
Econport, "Types Of Unemployment." N.p., 2016. Web. 23 Feb. 2016.
Hartman, Mitchell. "Does 5.1 Percent = Full Employment?". Marketplace.org. N.p., 2016. Web. 23 Feb. 2016.
Jones, Susan. "Record 94,610,000 Americans Not In Labor Force; Participation Rate Lowest In 38 Years." CNS News. N.p., 2015. Web. 23 Feb. 2016.
