A Concise Note on Unemployment Rate and its Outcomes

Samuel Gaither^*
*Correspondence: Samuel Gaither, Department of Economics, Tufts University, USA, Email:

Editorial

Unemployment refers to people who are competent and actively looking for work but are unable to find it. This category comprises those who are in the labour force but are unable to find adequate work. Unemployment is one of a country's economic indicators. It is calculated by dividing the number of people out of work by the total number of people in the labour force. A country's fiscal policy, for example, can have an impact on unemployment and the state of the economy. Furthermore, through monetary policy, a country's monetary authority, such as the central bank, can impact the availability and cost of money. In addition to unemployment theories, a few unemployment categorisations are used to more precisely model the impacts of unemployment inside the economic system. Structured unemployment, frictional unemployment, cyclical unemployment, involuntary unemployment, and classical unemployment are some of the most common types of unemployment. Structural unemployment focuses on underlying economic difficulties and inefficiencies in labour markets, such as a mismatch between the supply and demand for employees with required skill sets. Causes and solutions related to disruptive technologies and globalisation are emphasised in structural arguments.

Unemployment has an impact on both employees and the national economy, and it can have a domino effect. Employees face financial hardships as a result of their unemployment, affecting their families, relationships, and communities. When this occurs, consumer spending, which is a crucial driver of an economy's development, falls, potentially leading to a recession or even depression if not handled. Unemployment reduces demand, consumption, and purchasing power, resulting in poorer corporate profitability and the need for budget cuts and staff layoffs. It causes a never-ending cycle that is impossible to break without outside intervention. Unemployment refers to the status of not having a job yet actively looking for one. Economists distinguish between numerous types and theories of unemployment, such as cyclical or Keynesian unemployment, frictional unemployment, structural unemployment, and classical unemployment. Seasonal unemployment, hardcore unemployment, and hidden unemployment are some other types of unemployment that are occasionally addressed. Though numerous definitions of "voluntary" and "involuntary" unemployment have been proposed in the economics field, a basic distinction is frequently used. Cyclical unemployment, structural unemployment, and classical unemployment, on the other hand, are generally involuntary in origin.

However, structural unemployment may reflect previous choices made by the unemployed, whereas classical (natural) unemployment may come from legislative and economic decisions made by labour unions or political parties. Even when wages are permitted to adjust, the clearest cases of involuntary unemployment are those with fewer job vacancies than unemployed employees; thus, even if all vacancies were filled, some unemployed workers would still remain. Classical, natural, or real-wage unemployment arises when real wages for a job are set above the market-clearing level, resulting in a greater number of job seekers than vacancies. Most economists, on the other hand, think that as wages fall below a liveable rate, many people choose to leave the labour market and stop looking for work. This is particularly true in nations where low-income families are supported by public assistance systems. In such instances, wages must be sufficiently high to entice people to choose employment over government assistance.

When there is insufficient aggregate demand in the economy to supply jobs for everyone who wants to work, this is referred to as cyclical, deficientdemand, or Keynesian unemployment. Demand for most goods and services diminish, requiring less output and, as a result, fewer workers. Wages are sticky and do not fall to meet the equilibrium level, resulting in unemployment. According to demand-based theory, cyclical unemployment can be eliminated by raising aggregate demand for goods and services. However, the economy eventually encounters an "inflation barrier" created by the four other types of unemployment, to the extent that they exist. According to historical evidence, low unemployment affects inflation in the short term but not in the long term.

Long-term unemployment is defined as being unemployed for more than 27 weeks, even if the person had looked for work in the prior four weeks. For obvious reasons, the consequences are far severe than those of shortterm unemployment, and some of them are as follows. Sixty-six percent of long-term unemployed adults reported a significant decrease in their net worth. Long-term unemployment causes more than just financial problems; 46 percent of those in this circumstance report strained family ties [1-5].

Conflict of Interest

None.

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