ECONOMIC RECOVERY AND GROWING UNEMPLOYMENT

Understanding the Link between Economic Recovery and Growing Unemployment



Understanding the Link between Economic Recovery and Growing Unemployment

Introduction

Even though the economy seems to be growing again, it may be a while before the unemployment rate begins to decline, and it may even continue rising for some time after the resumption of sustained economic growth. The unemployment rate is generally a lagging indicator, meaning that its ups and downs happen some time after the ups and downs of other broad indicators of economic activity (Gordon and Margaret, 2006).

Unemployment may not fall appreciably when economic growth first picks up because some firms may have underutilized labor. At the end of a recession as demand increases, some firms may initially be able to increase production without adding workers. Firms may be able to increase their output by raising the productivity of the labor on hand.

a)- Define Unemployment

Unemployment is a condition in which an able person, or a part of the workforce of a country, is unable to find remunerated employment in accordance with existing labor conditions. To unify criteria, in 1982 the International Labour Organization proposed the following: The unemployed comprise all persons above a specified age who during the reference period were (a) without work, (b) currently available for work, and (c) seeking work. The most common indicator is the unemployment rate, which is calculated by dividing the total number of unemployed persons by the total civil workforce in the given reference period (Gordon and Margaret, 2006).

In the productive process and in organizations, not only should human resources be used to their full capacity, but also the available capital, natural resources, energy, and technology. When full use of these factors is deficient, it is considered underemployment.

Gordon and Margaret (2006) mention unemployment signifies that part of the population (mostly people between 15 and 64 years of age) that is eligible for and registered as wanting work. The “problem” of unemployment has attracted attention from economists, politicians, and the population at large. In particular, the volatile levels of unemployment are a salient topic in liberal democracies with responsible government and universal suffrage. The first question to be answered is: What exactly is unemployment and how should it be measured? Measurement, here, is not only an academic question regarding methodological rigor (i.e., validity and reliability), but also an indicator for how societal resources are distributed across the population (e.g., for men and women) and by economic sector. Both the level and the distribution effects of unemployment have social and political consequences. Economists, policy analysts, and political scientists have developed explanations of unemployment that will be discussed (Gordon and Margaret, 2006). The lesson that can be learned from this overview is that economic explanations tend to focus on the levels of unemployment, whereas sociopolitical explanations tend to focus on the effects of unemployment.

In words of Seccareccia (2004) statistically, unemployment is the numerical difference between supply and demand for work within a given territory. From this definition, one can observe that advanced democracies use ...