The United States has the largest national economy and it is the largest trading nation in the world. However, a segment of the US population is facing devastation of unemployment making it a significant challenge to the national economy. Unemployment has elicited important economic, public policy and political debates in the past. Currently, it is a significant topic for discussion in the political arena. The economic health of the US is often measured by the number of jobs created (Associated Press, 2012).
The recent financial crisis of 2008 increased the rate of unemployment, and impacted the economy negatively. United States government experienced a great pressure in the fields of taxation and public finances. Although the economy has shown good signs of recovery, unemployed Americans are still seeking for jobs. Unemployment is associated with loss of income and the consequent loss of health insurance. Unemployed people are usually unable to cover their health expenses. The government is forced to provide special health coverage assistance to these people; this impacts the economy negatively. Most unemployed people are uninsured; this puts the economic stability of the US at risk.
Unemployment rate is a measure of the growth rate of the economy. It is also used to measure the negative economic occurrences like recession. Unemployment rate in the US had increased during the credit crunch of 2008, and continued to increase after the economy showed the signs of recovery. After the credit crunch, employers were reluctant to hire more employees.
Reduced economic activities cause recession which results in unemployment. Loss of jobs results in a significant decline in earnings, and a decline in consuming capacity of unemployed people and their families. Unemployment is the major cause of mortgage defaults that crippled the economy of the United States. In addition, it reduces the ability to spend by affected families. This implies further decline in demand for goods and services. Businesses suffer significant losses and are forced to lay off some of their workers, which, in its turn, contributes to increased unemployment rates.
Small businesses in the United States are the largest employers accounting for over 50% of employed individuals, while large businesses employ about 38%. Small businesses are the leading creators of new job opportunities in the US. Statistics shows that only 50% of small businesses survived for half a decade in the United States. This shows that the leading employer in the United States is not only unstable, but also unreliable. Small businesses create more employment opportunities, but at the same time, they are the most affected by the financial crisis. This means that the great part of the American population lose their jobs. Continued reliance on small businesses shows that unemployment is a huge economic challenge (SBA, 2012).
The economic crisis of 2008 increased the rate of unemployment from 5% to 10% in the last quarter of 2009 fiscal year. In September 2012, unemployment rate stood at 7.8%. The present rate has been used by the current president in his bid for reelection. Reports indicate that a lot of people base their judgment on unemployment trends rather than the rates themselves. The report further suggests that in some states, unemployment has dropped because some people have given up their job seeking efforts; some have dropped out of their jobs. These people have lowered the rate of unemployment since unemployed status is only valid for people who are actively looking for jobs. The national unemployment rate decreased since wrong conclusions had been made. People with part time jobs who are still looking for better opportunities are mistakenly counted as employed (Associated Press, 2012).
Approximately four million young people were unemployed by July 2012, a slight improvement from 4.1 million youth last year. Youth unemployment has a great economic significance since these people form the most productive segment of manpower. Unemployment among American youth varies based on race and socio-economic background differences. Surveys conducted in July 2012 indicated that about 15% of white American youth, 29% of African American, and 19% of Hispanics youth were unemployed (BLS, 2012). Unemployment among the Hispanics and the African American youth is believed to be caused by drug abuse and increased crime among American youth (Haynes, 2009).
A survey conducted in August 2012 revealed: for every available job opportunity, there are six interested unemployed people. This shows that the country has not fully recovered from the financial crisis. In addition, statistics indicates that recovery from the financial crisis might be prolonged with poor economic development and longer periods of unemployment (Associated Press, 2012).
During the financial crisis of 2008, African American youths were worst hit by unemployment. Unemployment rate among young people between 16 and 24 years old reached 34.5%; this was similar to the Great Depression. Unemployment among young Americans has troubling effects on the economy. Unemployment among the young people has long lasting negative effects. It is hard for the victims of unemployment to recover financially in their future. This means that in future unemployed youths and their families are likely to live in devastating conditions. According to economists, young people hired with minimum wage are not likely to recover for at least ten years (Haynes, 2009).
Unemployment in the United States has detrimental effects on the economic potential and financial position of the country. Unemployment implies reduced production among capable individuals. It also means reduced performance in the business arena and reduced taxation; a form of government revenue. The government is also forced to aid the affected population through healthcare and other social amenities. Ultimately, the government debts increase reducing the national economic potential (El-Erian, 2011).
Although the nation has recovered from the credit crunch, unemployment rates are still considerably high. The rate would be higher that the present 7.8% if all part time workers seek for a full time employment. This indicates that unemployment rate is unexpectedly high; this is an economic predicament. Economic effects of unemployment in the US are multifaceted. Unemployment affects the economy, and affects personal lives of Americans. It is also responsible for increasing budgetary pressures, and intensifying social and political pressures (El-Erian, 2011).
A profound research indicates that when unemployment rates begin to rise, it is difficult for unemployed people to get employment. In essence, it is hard to restrain unemployment. The long-term effect is an unstable economy due to decreased productivity. Unemployment in the United States is deteriorated by lack of adequate investment in human resources, declining labor mobility and lack of job retraining plans. Unemployment problem in the United States will continue to rise, and the gap between the rich and the poor will continue to widen. Productivity and labor skills will continue to be undermined, and the economy will continue to be poor (El-Erian, 2011).
References
AssociatedPress. (2012). Unemployment rates fall in 7 US swing states and were unchanged in 2 others. The Washington Post , pp. 1-2.
BLS. (2012). Employment and Unemployment Among Youth Summary. Unites States Department of Labor: Bureau of Labor Statistics. Web.
El-Erian, M. A. (2011). Sleepwaliking Through America’s Unemployment Crisis. Project Syndicate, A World of Ideas. Web.
Haynes, D. (2009). Blacks hit hard by economy’s punch. The Washington Post , pp. 1-2.
SBA. (2012). Advocacy: The Voice of Small businesses in Government. US Small Businesses Administartion. Web.