Introduction
Ever since the end of World War II in 1948, there have been eleven recessions in the United States. Although the unemployment rate in the U.S. fell to the lowest 4.6% in November 1997, but ever since then, there have been secular increases in the country’s unemployment rates. Over the years, a variety of methods have been employed by the federal government, such as federal spending and tax cuts, to raise the employment rate and turn around recessions. Since the beginning of the U.S. economic structure, unemployment has been a problem throughout the country, even though the United States is regarded as a highly developed country and a world superpower. The purpose of this paper is to look back at the history of unemployment in the United States since the 1990s and its effects on our economy through the years.
Unemployment and Its General Consequences
Unemployment can affect households with unemployed individuals in many unfavorable ways. No doubt, unemployment is a drastic problem for those who are not able to find a job. A high unemployment rate also affects individuals who begin looking for jobs in the labor market for the very first time. In times of high unemployment, even if people manage to find a job, they are persistently paid lower earnings. As for individuals who abruptly lose their jobs for no apparent reason, the decline in earnings associated with this sudden unemployment, especially during a recession may persevere for years. Although earnings and family finances are definitely affected by unemployment, immediately and in the long run, unemployment can also impair an individual’s mental and physical health, increasing the rate of mortality. The schooling outcomes of children can also be worsened when parents lose their jobs, and once these children become adults, ultimately the outcomes of the labor market are also worsened. Unemployment can prove to be costly for a household in many ways, and the more and the longer the people in a household remain unemployed, the more drastic the effects of unemployment can be.
Unemployment And Its Effects During The Great Depression
Wall Street Crash of 1929, which is referred to as ‘Black Thursday,’ marked the beginning of the Great Depression. The United States along with many other countries experienced the Great Depression during the decade of the 1930s. A majority of the people living during this decade were in dire need of clothing, food, and shelter. In 1933 when Franklin D. Roosevelt assumed presidency in the United States, unemployment was a prevalent part of the lives of American citizens. The 1933 is considered the worst moment during the Great Depression because one in four Americans were having trouble find a job.
The unemployment rates during the 1930s rose from 3.2% to 25% in 1933, making those who were still employed both fearful that they could lose their jobs and thankful that they still had them. The inability to find jobs forced people, especially men to take to the roads, and thousands of them regularly rode the rails. Unemployment led to a great increase in the numbers of skid rows, and shantytowns, referred to as “Hoovervilles,” were set up by homeless Americans throughout the United States because they could afford a place to live due to their joblessness. It is not surprising that the unemployment that occurred during the Great Depression ended up changing the political structure of the United States to a great extent.
The peculiar thing about that decade was that the government did not have any systematic record of the statistics on unemployment. It was not until 1940 that the Bureau of Labor Statistics estimated that out of a labor force of more than 51 million people, merely one-fourth was employed. Not only was 1933 the worst month for unemployment in the history of the United States, March 1933 was also the worst month because almost 15.5 people were unemployed.
The grave unemployment during the Great Depression had an intense and in-depth emotional and social impact on the unemployed American citizens and their families. Historically, economic opportunity has always led to the movement of population, and when this opportunity was no longer available, this resulted in drastic changes in the movement of population. Unemployment virtually put an end to immigration from other countries. Farmers and their families who had been shifting to the city could no longer afford to do so, in fact, the opposite happened. To make matters worse, dust storms in the Great Plains during the 30s wiped out farms, forcing entire families from Arkies, Okies, and Mizoos to migrate to the west of the United States, especially to California. These families joined the homeless is the Hoovervilles. Unemployed Americans also lost their farms or homes due to their inability to pay mortgage.
Even during the New Deal era, unemployment was still high. One-fifth of the labor force in the United States still did not have work by the 1935. It was only during the years between 1935 and 1937 that the United States managed to recover from the Great Depression to some extent. In comparison to the level of industrial production in 1929, this level rose exceedingly during 1938. However, even though the labor force began to grow and productivity began to increase, an alarmingly large number of people were still unemployed. Recovery during 1939 was only modest since unemployment had already exceeded to ten million in the previous years. More than 17% of the labor force was now without work, which equaled to more than 9.5 unemployed million people. Even though New Deal policies prevented unemployment from pushing U.S. economy into a complete downward spiral, they did not solve the unemployment problem of the time.
Unemployment And Its Effects During The Recession Of 1953
The position of American labor completely transformed when during the brink of war in Europe in 1939. The United States quickly pulled out of the mass unemployment of the 1930s during the Great Depression once it began supplying Britain and the Soviet Union with arms. By the time the attack on Pearl Harbor took place, the United States was running short of skill labor, and as a result, by 1942 unemployment in the country had almost entirely vanished. However, following the Korean War that ended in 1953, unemployment was on the rise again and led to another recession. Once the Korean war ended, it was an inflationary period in the United States, where more dollars were being spent on national security. To control and restrain the inflation in 1952, monetary policy was tightened by the Federal Reserve. Pessimism about the economy increased and aggregate demand decreased once interest rates began to drastically change.
The rise in unemployment that occurred right after the Korean War ended revealed the true story of the recession of 1953. Even though employment was at a substantial high by 1953, thus keeping the economy at an amazingly high level, but the economy was inevitably bound to decline at some point. The rise in the unemployment rate during the recession of 1953 simply quickened the pace of the declining economy. Perhaps, Eisenhower did not take any action to tackle the unemployment during the recession of 1953 because the average unemployment rate was the lowest in the history of the U.S.
The recession of 1953 can also be considered from another outlook as well, by taking a look at the overall amount of jobs available at that time in the economy. In the period following 1953, a contraction of almost 1.6 million jobs took place within merely a year. Moreover, in comparison to the overall amount of establishment jobs during the economy of the early 1950s, but the rising unemployment in the following years of the recession reduced this amount considerably, resulting in the contraction of the labor force. Almost half of the labor force during the 1950s was involved construction or manufacturing jobs. Additionally, United States was one of the few countries in the world producing goods. United States was also manufacturing and supplying the Korean War effort. Thus, the almost 1.5 million lay-offs that occurred as a result of rising widespread unemployment had a severe impact on this sector as well. Similarly, the rising unemployment during the recession of 1953 also prove to be a recession for the manufacturing and service sector since the shortage of labor prevented both sectors from making any net gain.
Unemployment And Its Effects During The Recession Of 1970
Although unemployment persisted in the 1050s, it was as high as the 30s, and by the 1960s, the United States was prospering as far as employment was concerned. However, the scenario changed by the mid-1970s. During the 1970s, unemployment literally exploded in the United States, and of course, the consequences of this sudden rise in unemployment were explosive as well. By 1975, unemployment in the United States was at its peak, and in comparison to unemployment in the 1960s, there were thrice as many unemployed Americans now. Starting from around 4% to 5% at the beginning of the 1970s, the unemployment rate reached to almost 9% by 1975. This also marked the beginning of the persistent unemployment that has plagued the United States ever since.
The United States economy had already started feeling the effects of the rising unemployment during the 70s, soon after the Vietnam War had ended. The United States headed towards recession once again as a result of the rising unemployment along with other factors, such as high inflation and energy shortage. The American citizens were overwhelmed by these problems. The rise of unemployment during the 1970s had numerous adverse effects on the economy of the United States. Unemployment led to an acute increase in the price of raw materials. Even the cost of labor in the United States increased as a result of unemployment, and this further increased the rate of unemployment in the country.
Another drastic problem with the high rate of unemployment during the 1970s was that the United States ended up increasing stagflation because of it. Another reason that the United States was pushed into recession during the 70s was because of the oil embargo of 1973. Although, the money supply should have increased because of the inflation, also increasing the potential growth, but the opposite happened. United States was struck by both high unemployment and inflation. As a result, uncertain employers became sheepish and no longer lacked the willingness, when it came to hiring.
A common misconception that American citizens have is that they believe that the rate of unemployment started to fall by the end of the decade; however, the truth is that the decline in the rate of unemployment was different throughout the country. The reason behind this was that different areas in the country were dependent on particular industries. The rate of unemployment in areas such as Nebraska and Sioux County had dropped significantly because the respective industries that the areas were dependent were functioning smoothly. On the other hands, areas such Michigan and Ohio were known for their production of automotives, and by the end of the 1970s, the unemployment rate in these two areas rose once within merely a year because the automotive industry slowed down.
Unemployment And Its Effects During The Recession Of 1980
In January 1982, the unemployment in the United States, which had carried on from the previous decade, rose dramatically and left almost 3 million American citizens unemployed. The startlingly high unemployment rate in the 1980s was an “historic milestone” in the history of the United States as far as unemployment is concerned. The economic policy of the government of that time was severely criticized in the front-page of The Guardian from 27 January 1982. Even Norman Tebbit, the employment secretary, at that time confessed that the figures of unemployment would probably rise in the coming years, and they indeed did.
The perceptible rise in the rate of unemployment during the 1980s was not the only economic problem that the United States was facing during the recession. While the rate of unemployment continued to rise during the 1980s, at the same time, the available labor force also continued growing, but there was no growth in output during this period because of the unemployment. Despite the growth of the economy in 1983, the massive labor force that had continued to grow during the period prevented the rate of unemployment from dropping, and unemployment at a high peak level than it had been before the 1980s.
Unemployment And Its Effects During The Great Recession (2007-2009)
The period between December 2007 and 2009 in the United States is recognized as the Great Depression, perhaps also because the rate of unemployment during this period rose to 5%. In fact, the rate of employment continued rising, reaching the highest peak of 10% in 2009. As a result, the consequences of severe unemployment during this period were the second worse in the history of the United States ever since those that took place in the 1930s during the Great Depression. Unlike the Great Depression, the government funded safety net was protecting unemployed American citizens during the Great Recession. However, Americans citizens still felt that the Great Recession was so severe because of the unemployment had reached an extremely high rate and was preventing the U.S. economy from recovering quickly. As a result, the number of foreclosures in the country continued to rise, and both business owners and consumers were also facing looming financial problems.
For Americans under 80, the crisis of the Great Recession was all the more painful because they had experienced something almost similar during the Great Depression. Regardless of its name, the recession between 2007 and 2009 left them depressed, because unemployed American citizens not only lost their jobs and homes, but they were also under considerable financial burden associated with student and consumer debt. Thus, the magnitude of the effects of the unemployment during the Great Recession can be compared to those during the Great Depression. Moreover, the economic recession did not only affect the marketplace, but also had an impact on the mental health of unemployed Americans.
Unemployment Today
Following the Great Recession, once the United States finally began recovering from the recession, the rate of unemployment had slightly dropped in 2010, but still remained the second highest at 9.64%. By 2011, 13.9 million Americans were still unemployed, which signified that the unemployment rate in the country had slightly dropped but was still as high as 9.1%. Fortunately, by 2012, the unemployment rate in the United States significantly dropped down to 7.7%, and has remained steady in the present year. Fortunately, there has been hopeful job growth, and things look in favor of the current labor market in the United States. Although unemployment still exists, perhaps after experiencing years and years of recession, and with better policies from the U.S. government, unemployed Americans will most likely not feel the dire effects felt in the past as a result of the current rate of unemployment in the country.
Conclusion
It cannot be concluded whether unemployment in the United States is structural because educated citizens are now at a lesser likelihood of remaining unemployed than those who are uneducated. However, the overall scenario is that there are still not enough jobs for the whole labor force in the country. In fact, even though the rate of unemployment is lower than previous years, it is still not a sign of true improvement, and if unemployment is allowed to persist in the country, the United States could expect to face another recession in the coming years, consisting of unemployment and its associated consequences.
Works Cited
Arestis, Philip, and Elias Karakitsos. The Post 'Great Recession' US Economy: Implications for Financial Markets and the Economy. 2nd ed. Basingstoke: Palgrave Macmillan, 2010. Print.
McElvaine, Robert S. The Great Depression: America 1929-1941. New York City: Times Books, 1993. Print.
U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics. Web. 13 Mar 2013.
