The State of Unemployment in America

The State of Unemployment in America

By: Alice Liang | October 25, 2018

In September of 2018, the U.S. unemployment rate stood at 3.7%, a drop from 3.9% of two months prior. This was just below the 3.8% market expectation for the period, and the lowest unemployment rate in the U.S. since December 1969.

An analysis of unemployment data from the Bureau of Labor Statistics helped us come up with the following infographic.

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These unemployment rates have interested and baffled numerous economic theorists and investors in the past. As such, there have been frequent calls for the reduction of the rates over multiple presidencies and several decades.

Although the rate of unemployment in the U.S. has come down to 3.7%, the number of unemployed is still high and currently stands at 6 million. On average, over the past 60 years to date, this rate has been 5.77%, with November of 1982 recording the highest unemployment rate at 10.80% and May of 1953 recording the lowest at 2.5%.

A look at America’s unemployment rates would be incomplete without looking at the distribution among different demographics.

For instance, among adult women and whites, unemployment declined by 3.3% while the percentages for men, Asian, Hispanics, Blacks, and teenagers remained the same at 3.4%, 3.5%, 4.5%, 6.0%, and 12.8% respectively.

Given that some of the unemployed get intermittent jobs here and there, there is still a number (1.4 million) that remain jobless for periods over 27 weeks. These account for 22.9% of the total unemployed persons.

Although most of the unemployed are actively looking for jobs, in a majority of states, the number of unemployed largely remains above the national average. Of course, there are factors that affect the unemployment rates in the U.S.

Factors Affecting Unemployment in the U.S

These factors are either in form of frictional unemployment (when people leave for greener pastures/to find better jobs) or structural unemployment (when there is a mismatch between employees’ skills and job requirements).

According to the U.S. Bureau of Labor and Statistics, the unemployed constitute of jobless individuals who have been in active job search mode for the last month. For those who are no longer looking, they are classified as the labor force.

Some reasons causing unemployment include:

1. Global Competition

Globally, there are manufacturing and tech giants coming up around the world. Fierce competition from countries like China, Australia, Canada, UK, Japan, South Korea, Singapore, and even India has eaten into the pie that was at one point a preserve for American firms.

These countries continue to make their mark in varied industries, effectively pushing U.S firms out. Surprisingly, some foreign companies have even gone as far as bailing some U.S companies out from the verge of collapse and bankruptcy.

2. Outsourcing

The global workforce has changed and virtual workers are becoming a norm. Whether it’s in terms of business processes outsourcing or in terms of manufacturing, U.S firms have turned to South Asia for their hiring needs. The benefit to U.S companies is that they pay lower salaries as there is skilled cheap labor in Asia in comparison to what they would pay in the U.S.

Some firms have even gone as far as placing their headquarters in Asia. Eventually, outsourcing has ended up affecting the U.S economy as a whole.

3. Population

Every year, the number of job seekers goes up. As the population increases, more people graduate into the workforce with no guarantee of the increase in available jobs. Naturally, this phenomenon pushes the unemployment rate up.

It also doesn’t help that with plummeting commodity prices as experienced in the oil industry, companies are forced to cut down on costs, and often, they do so by reducing their employees. Others like big tech firms have outsourced their manufacturing to Asia where labor is cheap, effectively rendering Americans jobless.

4. Technology

Technological advancements have, like with everything else, brought out the good and the bad in equal measure. While the biggest advantage is the ease of doing business, the biggest effect has to be the loss of jobs and livelihoods.

Firms are slowly replacing human labor with machinery, computers, and equipment. Large companies that used to hire thousands of employees to improve on mass production have turned to technology as it’s faster and more accurate.

For now, the government seems to be working towards curbing unemployment by passing laws and policies aimed at protecting the American work force. While it has been working, we can only wait and see what the future holds.

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