Before discussing the unemployment status in the United States of America it is important to know the computational procedure adopted in US for the measurement of unemployment.
Measurement of Unemployment in US
The Bureau of Labor Statistics in the United States of America releases the statistics on the number of employed and unemployed on a monthly basis. Counting the number of individuals unemployed on the basis of the number of claimants of unemployment benefits is an improper measure of unemployment. This is because a number of individuals may be unemployed and yet not claiming benefits. Again, visiting each household to estimate the number of unemployed is costly both in terms of time and money.
Due to the limitations of the above-mentioned procedures, the government has adopted a sampling tool called the Current Population Survey to measure unemployment. This method is followed in the United States from 1940. The method underwent changes from time to time and is followed till date.
Unemployment In US Since 1960s
US witnessed a very low rate of unemployment (below 2%) in the 1960s because of the recession in the previous decade.
In the Mid sixties the neo economist proposed the idea that indeed, unemployment could be pulled below 4% keeping the inflation rate stable. Unemployment rate was 5% then and was in line with a sable inflation rate. But it is seen that whenever the natural rate of unemployment is low, inflation is on the rise.
If we have a look at the past forty years, it will be evident that the unemployment rate in US does not follow any specific trend it is highly fluctuating.
In the 1980s a high rate of unemployment was went hand in hand with high rate of inflation.
In the 1990s the US natural rate of unemployment fell to 5%.
The current unemployment rate in US is 5.1%, which is the highest in the last three years. There is a contraction in the payroll by 80,000, which has exceeded the predicted figure. According to the chief financial economist of the Bank of Tokyo-Mitsubishi in New York, the high rate of unemployment is indicative of the recessionary phase that US is presently undergoing. This has an indirect effect of dampening investors’ confidence.
Job losses in the private sector were 98000 workers. Employment in the public sector improved the figure to 88,000. In 2003 job losses occurred in US due to the Iraq war.
Factories have also released about 48000 workers out of which 24,000 job losses have taken place on the automobile manufacturing and parts industry. This is largely because of strikes in the automobile sector.
The payroll employment figures show that maximum job losses have taken place in the manufacturing, construction and employment services. In the month of March, the employment providing centers have released about 42,000 workers.
Employment has risen by 6000 in sectors like goods manufacturing, mining, health care and food services.
The labor market data from household sample show that last spring the labor force participation was 66%. In the month of March 62.3%of the total population was given a job.
In the above article we have highlighted the procedure adopted by the government to measure unemployment in US. Next, we have highlighted the trend in unemployment since the 1960s and focused on the current unemployment situation in US.