Unemployment and Recession: Causes and Relationship Report

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Unemployment can be termed as the period when individuals actively search for a job but still remain unhired. Recession is said to be the period when an economy is experiencing slow but steady GDP growth until a certain point when it reaches negative. At this point unemployment increases, businesses stagnate and generally the economy grows at a decreasing rate. This is mainly observed over a period of about two quarters of a year.

In the U.S and Europe, recession mainly follows increase in oil prices. Since most industries, if not all, depend mainly on oil as their main source of energy, experience decrease in business activities thus leading to laying off employees and a reduction in output. Economists consider this as stagflation since prices increased persistently due to the increased demand yet the supply is low. Another cause of recession is stringent monetary policy and increased cost of oil imports which tend to lower the rate of demand in the economy. These policies may cause a decline in the rates of interest for a prolonged period which causes consumer confidence to fall (Dow, 2000). The Federal Reserve plays the major role in promoting recession by the actions it undertakes to control the amount of money stock in the economy through money supply policies. Another problem is that some events may harm some particular firms of a certain industry and not affect the economy as a whole. This may be due to some innovation or price change of a key item that is most important and commonly used. This forces the firm to lay off workers and relatively leads to reduction in production affecting the industry as demand is adversely reduced. Comparatively, other firms are hiring more labor and are being assisted by the recession. In Europe some firms or industries have been doing well in times of recession unlike others which have been badly affected (Kindleberger, 1986).

Many jobs especially in manufacturing industries and factories are always the most vulnerable since production decreases. Service jobs such as restaurants, travel industries and store personnel follow. Sales positions are cut off since sales reduce due to the decline in production. Government service positions such as police and fire personnel are also cut to safeguard the remaining funds. Advertising and PR was not spared too as many were laid off due to the less consumer spending habits.

These jobs never come back because since some firms may be affected leading to close down of the firm or even the industry especially in boom periods. For others high paying jobs in finance may not be available to them due to high qualifications or even due to lack of funds and fall in profits. Innovations especially in the information technology sector have led to the elimination of many positions such as the clerks and secretaries (Vedder and Lowell, 1993).

The western countries must remain competitive by ensuring that the undertake ways to handle themselves during recession. Governments to lower taxes which will increase money supply in the economy, reduce business regulation thus encourage new businesses to come up which will increase employment and introduce insolvency laws which will aid in preventing irresponsible credit lending.

Saudi Arabia is a prime market because of oil production in that country. It is the largest Arabic country in the Middle East and the main source of energy production due to the largest oil reserves it has which attracts many to transact business In exchange for oil. Many consider it to have great potential. It is considered as the capital centre for Arabic nations and one of the fastest growing economies. With well established airline, The United Emirates, many people travel with much ease and comfort. It is mostly known to have high employment rate and tourism is well established investment opportunities and the improved technology which attracts many across the globe. It is strategically positioned thus has easy access to it both by air and water (Madawi, 2002).

References

Dow, C. (2000). Major recessions: Britain and the world, 1920-1995. Oxford: Oxford University Press. Print.

Kindleberger, Charles. (1986). The World in Depression, 1929-1939. Berkeley: University of California Press. Print.

Madawi Al-Rasheed. (2002). A History of Saudi Arabia. Cambridge: Cambridge University Press. Print.

Vedder, R. and Lowell E. (1993). Out of Work: Unemployment and Government in Twentieth-Century America. . Print.

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