How Bad Is the Unemployment Rate and What Does It Mean?
The unemployment rate has always been a fairly significant indicator of economics. But first thing first, we should learn how bad is the unemployment rate in the U.S. today. Although the United States' unemployment rate fell from 14.7% in April to 11.1% in June, there are still five states with over 15% of people who can't find work. (Duffin, 2020) This looks even more extreme in the big cities, like New York and Los Angeles. Both cities had a jobless rate of around 20%, meaning 1 in 5 Americans do not have a job. (Iacurci, 2020) New York did a pretty good job of controlling the COVID-19 compared with Los Angeles. Although the number of unemployed people has dropped by 1 percent in LA, it came with a price. The recall of furloughed workers largely increased the confirmed case of COVID-19 in the LA area and even the entire state, forcing governor Gavin Newson to shut down some businesses again.
Economists infer that this level of the unemployment rate is likely to be an indicator of a new economic "depression". Although it does not have an unequivocal definition, an economic depression generally marks by a decline of real GDP exceeding 10% or a recession lasting two or more years. (The Economist, 2008) A recession means a declining economic activity and weak purchasing power is a result of unemployment. The Depression-era peak unemployment rate reached 25.6%. And thus, there are good reasons to believe that such a high employment rate may cause an economic recession.
However, the unemployment rate is only one indicator of an economic depression, and some hard times this country has experienced does not qualify as depression. In fact, most economic crises were called "panics" instead of "depressions". Economists tend not to name a short-term contraction as an economic depression. Moreover, the unemployment benefits and the additional $600 per week provided by the CARES (Coronavirus Aid, Relief, and Economic Security) Act can make up for the loss of jobless Americans.
Some would argue that this additional compensation may not be as beneficial to the society as it looks because $600 is more than some low-wage laborers can possibly earn in a week. Under the circumstances, people may be reluctant to work even when they have the ability to contribute. For the ones received the $600 during the past four months, what did you do? Did you learn something new? Did you continue to work at home (if you were able to keep your job) for the benefit of the society?
1. Iacurci, G. (2020, July 22). A second Great Depression? Unemployment crisis hits big cities hard. Retrieved August 05, 2020, from https://www.cnbc.com/2020/07/21/some-big-cities-are-hitting-great-depression-unemployment-levels.html
2. Duffin, P., & 2, J. (2020, July 02). U.S. unemployment rate: Adjusted, June 2020. Retrieved August 05, 2020, from https://www.statista.com/statistics/273909/seasonally-adjusted-monthly-unemployment-rate-in-the-us/
4. USAFacts. (2020, July 24). Historic Unemployment Weekly Claims: Unemployment Data. Retrieved August 06, 2020, from https://usafacts.org/visualizations/weekly-unemployment-claims/?utm_source=google