High unemployment rate has been brought about by recession, rapid changes in technology which renders some employees jobless, undulating business cycles, and financial constraints in many organizations that complicates course of action in the coming years. This makes it difficult to predict or estimate the rate of unemployment in the years ahead.
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The best measure of unemployment is taking a sample of households, and taking the number of unemployed in that particular household and also looking at the number of people who have registered in employment agencies. Unemployment ratio is measured by dividing the number of individuals by all those who are employed.
Labor markets are going down and this has resulted to a higher rate of unemployment as compared to employment rate. This has gone to a higher percentage. Organizations try to push the full employment but this does not generate more output, but instead puts more pressure on inflation. Besides, economists believe that 7% or 6% unemployment has been contributed by the recession.
Economists also predict that it would take 4 to 5 years for the job market to go back to normal. Labor force participation of older workers has risen, but as they age and retire, the labor force goes down.
Labor force from other age groups is decreasing because they prefer to further their studies and some opt to stay with their parents at home. On the other hand, unemployment affects the government output because of the reduction of work force.
There is also reduction in tax revenue since there is no deduction of tax revenue for the unemployed, and there is also a huge expenditure due to insurance claimants who have been rendered jobless.
Likewise, economists believe that economy needs to be adjusted in order to go back to normal rates of unemployment. Some think that it will be possible after five years while others think after seven years or even more.
They say that the normal will be worse than the old normal. There are different types of unemployment: the first one being frictional unemployment which occurs when one has lost a job and is looking for another one; seasonal unemployment; and structural unemployment which is caused by change of the industry production.
Some educated students tend to think that they must be employed in what they studied and they have the perception that education helps them to secure jobs rather than be able to do business in order to survive – they fail to understand that what matters is the income earned
Furthermore, economists believe that before recession, unemployment of 5%was caused by the rate in which people were searching for full time employment. The rate of unemployment cannot go back to zero because people are employed and at the same time others are fired, hence there are many skills than the job market demand.
Housing market makes the unemployed to live at one place for long, because one in four home owners are under pressure with their mortgage, and hence shifting is not easier and this minimizes the chances of job search to other areas. This made immigration fall to 12.5% in 2009.
In conclusion, unemployment rate is seen by the analysts as a sign of an economy which is going down but a decrease in the unemployment rate is an indication that the economy is becoming better. In order for the government to reduce unemployment, it should reduce taxes in order to increase the number of investors.
If the government fails to take measures to the rising rate of unemployment, then it has a long road to recovery. Governments need to come up with self employment projects so that the youth can be absorbed into these projects and earn a decent living without relying on being hired by organizations.
The agricultural sector has many opportunities which are yet to be exploited due to lack of funds. Most people are interested in venturing into business world if only they can be provided with incentives to help them get started.