Abstract
Economic growth is an indicator of diversifying markets, opening up new businesses and jobs, and enhancing society’s general welfare. Unemployment shows the orientation of a particular region’s economy and its connection to the specialization of the labor force. The United States has demonstrated strong economic growth and declining unemployment rates over the past ten years after the global financial crisis in the late 2010s. However, the 2020 pandemic has sharply worsened both indicators, proving their correlation. The hypothesis of the research is their relationship in shock economic conditions but, at the same time, possible deviation due to cultural or financial markers. This study’s methodology is the collection of data in the literature and econometric calculations of both analyzed indicators, regression analysis, and obtaining quantitative and qualitative markers. Growth and unemployment have been proven to be correlated concepts, with the transformation of one leading to changes in the other and vice versa.
Background
The economic status of the region directly depends on material and intellectual resources, market conjuncture, ecology, and the existence of a technical base for creating an optimal working structure. Unemployment is considered to be one of the factors that demonstrates a country’s financial position. The corresponding figures characterize the structure of economic dynamics and the diversification of the labor market. The US has an uneven unemployment rate: it fell gradually from October 2019 (10%) to February 2020 (3.5%), which signifies a robust economy (“Civilian unemployment rate,” 2020). However, the global coronavirus pandemic has caused irreparable damage to the global financial balance. It is no secret that the suspension of enterprises’ activities and the forced quarantine entered the American economy into a period of stagnation. People have stopped earning and spending money, and companies have produced much smaller quantities. Consequently, economic growth was stalled, while the unemployment rate reached alarming levels. The hypothesis of this study is a positive correlation between the two indicators due to the creation of new jobs, an increase in business financing through investments, and an improvement in resource provision later.
Purpose of the Study
This study is essential in terms of assessing current world events in an economic context. For example, the global pandemic has caused irreparable harm to the broader community, with consequences for the professional sphere’s well-being. The production shutdown and quarantine restrictions have led to a catastrophic rise in unemployment, as well as slowing down long-term economic growth. Thus, this study will create a context for markers that affect the region’s financial well-being, including shock conditions. The analysis will then cover the necessary information gap in linking economic growth with socio-cultural factors such as migration. Thus, the study’s purpose is to investigate the relationship between the two indicators and build a forecast for further financial transformations in the public sector.
Research Framework
Comparing economic indicators always requires studying the dynamics of the corresponding trends. The initial phase of the analysis will be econometric calculations, namely to compare the quantifiable markers of economic growth, such as GDP and growth rate, and unemployment as a percentage. The theoretical basis will be presented using literature and official statistics that show corresponding dynamic trends. Specific economic events such as the coronavirus pandemic and the 2008 financial crisis will be compared with the unemployment rate to study the correlation. Finally, the discussion section includes an analysis of the data obtained and the identification of explicit criteria for the relationship between the two concepts in the American economy. Thus, the research framework targets the question about the objectivity of the relationship between economic growth and unemployment in the United States.
Literature Review
Economic growth is a promising predictor of changes in the lives of the population, but it is not an axiom. It has been noted that infrastructural changes, increased human resources, and increased market size are targets for a planned economy (Palei, 2015). Accordingly, the desired indicators are derived factors after steady growth is recorded. Increasing market size and GDP, creating new jobs, and diversifying the economy to improve human capital are the goals of subsequent processes resulting from the rise in stocks. On the other hand, the unemployment rate is one of the factors of stagnation. Regardless of the region, a high indicator demonstrates the limited number of jobs or professional qualifications, as well as the willingness of the employer to maintain optimal wages (Velev, 2018). It reflects the relationship between unemployment and the level of economic growth since access to a variety of labor facilities characterizes the diversification of supply in the market.
The American and global economy is stagnating due to shock constraints in response to coronavirus infection. It is no secret that many businesses went bankrupt, and millions of people became jobless due to quarantine restrictions. Accordingly, the unemployment rate rose by almost 50%, and the production level had a logical decline. According to primary research, the pandemic triggered a sustained drop in GDP, exacerbated by spending on unemployment benefits and compensation payments (Chien, 2020). The objective conclusion is that economic growth is sensitive to market force majeure on a global scale, and even the American financial system has a catastrophic decline. The reverse argument is the long-term freeze of the economy due to the outbreak of unemployment since a return to optimal production indicators will be impossible in the coming years. Therefore, market growth and labor market performance are directly dependent on global safety and relevant trends.
Migration is an essential economic indicator as it demonstrates the potential of the labor market in the country. It is apparent that the decline in the region’s population due to professional reasons is the result of poor economic development, tough business and tax policies, and an unfavorable balance of income and expenses. On the other hand, the influx of migrants into the country means more favorable conditions for non-residents and cultural diversity in the professional sphere. The United States remains one of the leading relocation destinations as people gain flexible job opportunities and diversified economic requirements. Research shows that migration contributes to GDP growth and job creation, which in turn contributes to unemployment and real economic growth (Bove & Elia, 2017). Enterprises seek to diversify their corporate culture, and the assimilation of non-residents is becoming mutually beneficial cooperation. Economic growth is based partially on the parallel development of sectors, which can be compensated for by non-US specialists as required by specific enterprises. Thus, migration processes have a positive effect on federal finances while closing the pinpoint crises of unemployment in certain areas of activity.
Methodology
The primary research tool is the narrative literature review, the sources of which are available in public databases. Gathering the necessary information makes it possible to evaluate both research factors as autonomous economic indicators and interrelated processes. Econometrics is one of the methodological approaches that is responsible for quantitative data. Economic growth is based on GNP and GDP, which can be used to derive measures and growth rates for the base period. Thus, econometrics will be used to generate statistical information for periods before and after global crises to track the relationship with unemployment.
The methods of analyzing the results are narrative, econometric (quantitative with appropriate data validation strategies), and general regression. First of all, the literature review includes sources on economic and related topics to understand this study’s broader context. The narrative approach connects the presented publications, their theses, and results, with a hypothesis using critical analysis. Besides, the econometric method of data analysis allows for independent calculations of essential indicators, including real and projected economic growth in the United States. Regression analysis will be used to synthesize literature information and econometric indicators as independent variables. Thus, the data analysis methodology will make it possible to compare economic growth and unemployment, while basing the research on evidence-based information.
The research limitation is the multifactorial nature of economic growth and unemployment indicators. A more in-depth study of these concepts in terms of social, cultural, and professional spheres of activity would allow for a more objective assessment. However, limited data on economic shocks, inequalities in the labor market, and a constant transformation of the market environment impose difficulties in collecting information. Further research should be aimed at data detailing, namely similar studies at regional, state, and urban scales. Thus, this paper can be used as a springboard for initiating more specific topics in the framework of unemployment and economic growth.
References
Bove, V., & Elia, L. (2017). Migration, diversity, and economic growth. World Development, 89, 227-239.
Chien, Y. (2020). How bad can it be? The relationship between GDP growth and the unemployment rate. Economic Synopses, 2020(16).
Palei, T. (2015). Assessing the impact of infrastructure on economic growth and global competitiveness. Procedia Economics and Finance, 23, 168-175.
U.S. Bureau of Labor Statistics. (2020). Civilian unemployment rate [Interactive graphic]. bls.gov.Web.
Velev, M. (2018). Unemployment and economic growth: Is there a relationship in the European Union? Acta Oeconomica Pragensia, 26(4), 12-29.