In February the economy shed 63,000 jobs; according to the New York Times this is the fastest falloff in five years and the strongest evidence yet that the nation is headed toward (or may already be in) a recession. Despite this staggering loss of jobs, the unemployment rate in February actually fell to 4.8% from 4.9% in January. How could the employment rate AND unemployment rate fall? The answer lies in the government's definition of unemployment: the unemployed includes only those people actively looking for work. Thus, the unemployment rate fell not because more people found jobs, but because more of the jobless gave up looking for work. Another cause for the lower unemployment rate could be that there has been an increase in the number of people who choose not to work purely by their own choice. The growth in the number of nonemployed people may also explain why overall wage growth has remained stagnant. With an increasing pool of people who are not employed but willing to work for the right price, those who DO have jobs find themselves with less bargaining power. Essentially, since the labor pool is growing, employers have less incentive to give their workers raises because there is a large supply of labor that would readily take jobs at a lower price.
So what's the government going to do? The president acknowledges the fact that the economy has slowed but remains confident that the recently enacted "stimulus package" and his "pro-growth, low-tax policies that put faith in the American people" will help stimulate the economy.
The government has announced two actions intended to keep supplying extra money to the economy for at least the next six months. First, the government will increase its lending through the "Term Auction Facility." Starting on Monday, the government will increase the amount available to $100 billion a month. Second, the government will buy about $100 billion in securities ranging from Treasury securities to mortgage-backed securities issued by the Federal Housing Administration.
Do you think the government "stimulus packages" will keep us out of a recession, or is it too late? Do you think there are any other explanations for why both the unemployment and employment rate fell? The employment rate is not the only indicator of the health of the economy, are there any other indicators that you know of that indicate how our economy is doing?
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2 comments:
i think the stimulus package could help, but it probably won't have a major effect. However, at least the president is taking some action and not leaving the economy to continue in its recession.
I don't think the package is a good idea because by giving almost everyone more money that will lead to inflation which will become an even larger problem with foreign exchange rates and stuff! It's stupid that the government would change it's definition of unemployment because then we won't have a consistent standard to base now to the past to!
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