Unemployment in the US

Unemployment is becoming a public debated issue in America due to its effects on economic growth. Increased unemployment has raised concerns among the public policy makers, economists and political analysts as it is becoming an impediment to economic growth. Unemployment described as a state where individuals qualified for various jobs and willing to work, are actively seeking for employment opportunities that are not available. Many of the social problems, for instance crime, have been associated with the increased rates of unemployment. The federal government is working closely with the various state governments and other private sector stakeholders to find a permanent solution to unemployment. A solution to unemployment is likely to present a solution t a series of social and economic problems (Yellen, 2014).

The Obama administration came to power with the promise of creating more job opportunities, especially for the youth. Current statistics depict a significant reduction in the unemployment rates. Data from the Bureau of labour indicates that 248,000 jobs created in the recent years have improved the unemployment situation in America (Bureau of Labor Statistics , 2015). The increasing population and better public education have been major contributors to the ever increasing unemployment rates. Data shows that close to 9.8 million American citizens are unemployed. This number is likely to reduce if the current policies are successfully implemented. The Bureau of Labour Statistics approximates that more than1.2 million jobs will be created in the current fiscal year (Bureau of Labor Statistics , 2015).

The labour participation rate, that is, the number of individuals actively involved in employment, was documented as 62.7% in 2014 (Yellen, 2014). This is the lowest value ever recorded in the US history since 1978. Janet Yellen, the Federal Reserve chair, is concerned that the current job numbers are not demonstrative of the national crisis (Yellen, 2014). She argued earlier that those behind the statistics were striving to better their lives. Despite her sentiments about the number of job opportunities created which were higher than what economist expected, economic analysts still recommend a certain degree of cautiousness. They also asserts that, if there is a further reduction in the rate of unemployment, a faster economic growth rate is likely to be achieved. Unemployment is one of the macroeconomic variables that need to be regulated so as to attain economic growth (Yellen, 2014).

To change the current situation, the government can engage in demand expansion policies. This will include the use of fiscal policies geared towards increasing aggregate demand in the economy. The first fiscal policy is a reduction in the taxation rates. Reduced tax rates increase people’s disposable income. This will increase the aggregate demand for goods and services. The real GDP will rise as firms will be producing more products and services to counter the growing demand. Increased production will consequently require more manpower, meaning that firms will have to hire more workers in their bid to increase production. The government can also increase its public expenditure. This pumps more money into circulation and thus increasing aggregate demand. This strategy will have a similar effect as a reduction in the taxation rates.

Monetary policies can also be used to induce employment in the economy. The government, through the Federal Reserve, can reduce the interest rates in the economy. This reduces the cost of borrowing. This makes funds cheap and readily available to the public. People will have more money to spend on goods and services. In turn, it increases the aggregate demand in the economy (Yellen, 2014). As stated above, there will be increased production and eventually increased demand for labour by firms.

References

Bureau of Labor Statistics . (2015). The Employment Situation. Washington, D.C: U.S Bureau of Labor Statistics .

Yellen, J. L. (2014, August 22). Labor Market Dynamics and Monetary Policy. Retrieved from Federal Reserve Bank: http://www.federalreserve.gov/newsevents/speech/yellen20140822a.htm