UNEMPLOYMENT IN US

Unemployment in US

Unemployment in US

Introduction

Defining the Problem

Unemployment denotes the existence within a humanity, geographic locality or social assembly of significant figures of mature persons searching paid work, and the occurrence of such a condition. It has been a chronic characteristic of up to date societies, which are founded on paid employment. Except for the 30-year time span after World conflict II, these societies have commonly not supplied sufficient paid work for the mature person population. Unemployment has been the cause of common communal and political conflict, as well as substantial communal and psychological distress.

Current Situation

The high levels of unemployment in the contemporary times have led many writers to question the viability of returning to full employment, and the whole future of paid work. According to the researchers, the contemporary times are witnessing the emergence of permanent mass unemployment societies. As more and more paid work is being replaced by microelectronic and telecommunications systems in 'the robot revolution', goods and services can be produced with less investment, fewer raw materials and less labor. It is likely, therefore, that these societies will experience 'jobless growth', that is, economic growth may occur but it will not be associated with equivalent expansions of employment.

Expansionary monetary policy, money supply growth in the economy and, consequently, leads to an increase in interest rates, while monetary policy concretionary reduces the supply of money in the economy and reduces interest rates. In the United States, a central agency, which implements monetary policy Federal Reserve System? For purposes of this document, when discussing monetary policy, we will discuss monetary policy in the United States.

The relationship between unemployment and inflation has long been the centre of macroeconomics. At the Phillips curve was an extremely important role in the evolution of monetary policy. It reflects a significant correlation between unemployment and inflation (Cencini & Baranzini p 4). The Phillips Curve in the 1960's suggested that tolerating low levels of inflation would allow permanently lower unemployment.

In the 1970's when the trend of inflation rose, the public expected higher inflation to persist and the Phillips Curve shifted out. While the Phillips Curve was migrating in a north-easterly direction given any level of unemployment was related to higher levels of inflation. Meaning if the Phillips Curve is indeed migrating then the relationship between inflation and unemployment is really a negative one. Therefore, policymakers underestimated the extent they could influence the evolution of expectations and reduce the cost of disinflation. The Federal Reserve responded by raising real interest rates higher than necessary. Needless to say the Phillips Curve was amended. The amendment involved specifying price setting frictions that make a firm's choice of the price of the price of its good or services a dynamic decision that depends on Expectation of future inflation (Bradley p 45). In this model, current inflation depends on real economic variable for example production cost (Yates pp 178-211).

The tradeoff between unemployment and inflation first reported in the late 1950's is simply that as unemployment falls workers are empowered to ...