Unemployment 2
The United States compared to other countries.
The unemployment rates skyrocketed in not only the United States but also across the world’s best economies. The advent of the COVID-19 has undoubtedly impacted the economies of most nations in the world, and the US is no exception (Holzer, 2020).
The United States unemployment rates escalated due to delayed shutting down of the economy and failure to impose emergency measures when the pandemic struck. Many individuals lost their jobs between March and May (Holzer, 2020).
Most countries in growing economies subsidized their firms in a move to keep their workforce under payroll. These countries, for example, France, Switzerland, and New Zealand, relied on these subsidies amounting to up to 40-50% of its labor force being covered (Holzer, 2020).
In January, unemployment rates in the US were 3.6% in its pre-COVID-19 and only rose to 4.4% with an increase of 0.8% since the US embarked on closing down its businesses to combat the rise of the virus.
The increase in the US’s unemployment rate within that period is larger than all the 22 countries in the study; only three countries, Canada 2.3%, Austria 3.5%, and Spain 14.4%, have recorded a higher increase in unemployment rates than the US.
According to the projections, the US will endure difficult moments in its unemployment than other OECD countries soon as a result of not strategizing on payroll protection of its employees like many other OECD countries have embarked on (Holzer, 2020).
Effects unemployment has on the economy.
Unemployment has major ramifications for the economy of any given nation. This leads to the federal and state governments through Medicaid, food assistance, and unemployment benefits (Heim, 2019). As a result of unemployment, the federal and state governments are not collecting much on income taxes, which form the basis of states’ economies, thus forcing the governments to borrow money. This impacts the economy negatively (Heim, 2019). During July 2020, the state and federal governments paid a total of $18.26 billion in unemployment benefits.
High unemployment leads governments to impose large taxes on the companies to balance and create some income. This move by the governments discourages companies from hiring more workers because it becomes expensive to retain a large workforce with high imposed taxation and fewer demands for their products.
Unemployed people and personal consumption take up to almost 70% of the US economy’s total income. This reduces the Gross Domestic Product (GDP) of the country, affecting the efficient allocation of resources by the governments, thus affecting the economy.
- Lower Income
Lower-income is directly associated with unemployment and has grave bearings to the economy. The lower the income earned, the lower the spending, and thus the government’s income taxes are reduced by a significant margin (Petrosky-Nadeau & Zhang, 2020).
- Lower Spending
Unemployment rates in any given country affect the country’s economy since the people lack jobs and therefore have limited chances of earning money; their spending is directly proportional to their income (Petrosky-Nadeau & Zhang, 2020). This means that there will be lower spending as compared to if the people were employed. Lower spending has various impacts on the economy.
- The economic impact on the nation
Lower spending due to unemployment has a great impact on the nation’s economy in the following ways; disposable income, which is the average income of an individual minus taxes, is dictated by rising demands (Heim, 2019). In this case, employees’ pay will rise to create more spending. Inflation comes from the failure of manufacturers to increase supply to meet demand, thus escalating commodity prices.
The economy is also impacted negatively through income per capita, which tells how much an individual has to spend (Petrosky-Nadeau & Zhang, 2020). It is the measure used to gauge the standard of living of individuals. Finally, household debt, including school loans, auto loans, and credit card debt, all impact the economy with high unemployment in the country.
- Impact on innovation
Innovation is essential for any company because it helps the company utilize its employees’ skills and competencies for the greater good of its prosperity (Heim, 2019). However, this may not be the case with lower spending that may make it difficult for companies to venture into innovative ways to make their policies work. Innovation promotes a culture of continuous learning and personal development, which will not be realized with the high unemployment rates (Petrosky-Nadeau & Zhang, 2020).
- Statistical analysis
The Bureau of Labor Statistics shows that the US created 638,000 jobs in October (Clarice, 2019).
The projection shows that had the pandemic not occurred around February, the US would have created 11.6 million jobs by October 2020. The economy is down by 10 million jobs from what it was in February. The current national unemployment rate as of October stands at 6.9% (Clarice, 2019). The share of the prime working-age population with a job is 76.0%. Since October 2019, the average nominal growth is 4.6%. The long-term unemployment, which is 27 weeks and over, increased to a 1.2million in October while the local governments and states jobs declined by 1.3 million jobs over the last 8 months alone (Clarice, 2019). The month of April witnessed the highest unemployment rate with 14.7%, while the rate declined systematically with May at 13.3%, June 11.1%, July 10.2, August getting down to 8.7%.