Why Is Unemployment So High

Four Causes Of Frictional Unemployment

One cause of unemployment is voluntarily leaving the workforce. Some of the unemployed have saved enough money so they can quit unfulfilling jobs. They have the luxury to search until they find just the right opportunity. The second cause is when workers relocate. They are unemployed until they find a position in the new town.

The third cause is when new workers enter the workforce. This includes students who graduate from high school, college or any higher degree program. They look for a job that fits their new skills and qualifications. That is a primary cause of youth unemployment.

The fourth cause is when job seekers re-enter the workforce. These are people who went through a period in their lives when they stopped looking for work. They could have stopped working to raise children, get married or care for elderly relatives. These four causes are an unavoidable part of the job search process. The good news is that frictional unemployment is usually voluntary and short-term.

What Causes Cyclical Unemployment

The seventh cause of unemployment is when there are fewer jobs than applicants. The technical term is demand–deficient unemployment. When it happens during the recession phase of the business cycle, it’s called cyclical unemployment.

Low consumer demand creates cyclical unemployment. Companies lose too much profit when demand falls. If they don’t expect sales to pick up anytime soon, they must lay off workers. The higher unemployment causes consumer demand to drop even more, which is why its cyclical. It results in large-scale unemployment. Examples include the financial crisis of 2008 and the Great Depression of 1929.

Why The Unemployment Rate Increased In August

The unemployment rate increased by 0.2 percentage point from 3.5% in July a level that had tied with early 2020 as the best since 1969.

The movement upward in August was largely attributable to hundreds of thousands of people entering the labor force, economists said.

The government doesn’t count individuals as unemployed when they’re out of the labor force since they’re not actively looking for work. People left the labor force for various reasons during the pandemic, including illness, child care and other family responsibilities, and early retirement.

Now, there are more people looking for work and they’re officially counted as unemployed, which has had the effect of nudging up the jobless rate.

About 786,000 people came off the sidelines last month, which is a “huge” number, Pollak said.

The labor force participation rate the share of people in the labor force relative to the U.S. population grew by 0.3 percentage point to 62.4% that’s a swift increase for a measure that generally moves by just 0.1 point, if at all, from month to month, Pollak said.

“There’s more willingness to work, more eagerness to find jobs and actively search for them,” Pollak said.

Also Check: How Much Does Unemployment Pay

Unemployed People Were More Likely To Remain Unemployed Than They Were Before The Pandemic

In the CPS, for any given month, a person can be classified in one of three labor force categories: employed, unemployed, or not in the labor force. A persons labor force status can change or remain the same from month to month. For example, an unemployed person could remain unemployed, find employment, or leave the labor force. In 2020, 21.7 million people, or 8.4 percent of the population ages 16 and older, changed their labor force status in an average month. This represents the highest annual rate of change in labor market status since 1990, the first year for which comparable data are available.

The CPS data on labor force flows provide additional insights into changes in the unemployment rate.21 In December 2020, 54.6 percent of the unemployed remained unemployed in the following month. This was higher than the percentage a year earlier, when 48.6 percent remained unemployed. Among the unemployed, 24.8 percent found employment and 20.6 percent left the labor force in December 2020. These measures are down from 27.3 percent and 24.1 percent, respectively, from a year earlier.

Why Is Unemployment High Right Now Unemployed Americans Blame The Pandemic Not Government Payments

The United States is experiencing a labor shortage among restaurant and tourism industries, prompting speculation about the reason. Some theorize that potential workers are still needed at home or have ongoing health concerns, while others believe that federal unemployment benefits are too generous, and thus, incentivizing people to not work.

Americans who lost their jobs during the pandemic currently receive a $300-per-week federal supplement on top of standard unemployment insurance of $600 a week. Many states are looking to cut federal jobless benefits enacted during the COVID-19 pandemic, a move that is expected to cease extra unemployment checks for millions of Americans this summer. Republican leaders are hopeful the move will send people back to work.

Data from the latest Yahoo News/YouGov poll shows that three-quarters of Republicans believe that government payments are making it too easy for the unemployed to not work, compared to the one in five Republicans who say the pandemic is what makes it hard for Americans to find employment. Three in five Democrats blame the pandemic for the high levels of unemployment, rather than the government payments being too generous .

The early end to federal unemployment benefits is taking place in at least 21 states, with more states proposing similar measures. Americans themselves are split on whether the $300-per-week federal supplement should continue on top of standard unemployment insurance or come to an end .

Recommended Reading: Youth Unemployment In The Middle East

Where Is Unemployment The Highest In The Uk

In the United Kingdom between 1971 and 2022, there was an average increase of 6.77 percent, reaching an all-time high of 11.90 percent in April of 1984 and a record low of 3.40 percent in December of 1973.

The number of people without jobs in the UK increased by 15,000 in the first quarter of this year. The unemployment rate increased to 7.8% in December, up 0.1 percentage point from October 2012. Despite being steady, the rate is still significantly higher than the lows of 4.7% seen in 2004 and 2005. In 2016, Birmingham Ladywood claimed the highest claimant rate , closely followed by Belfast West . The second tab includes rankings for each constituency based on men and womens and womens rates as well as a variety of other metrics.

Employment Declined By A Record Amount In 2020

Although the labor market remained quite strong early in 2020, employment fell sharply in the spring with the onset of the COVID-19 pandemic. Employment growth in the second half of the year led to a recovery of about half of these employment losses. Employment averaged 149.8 million in the fourth quarter of 2020, down 8.8 million from a year earlier.

Much of the employment decline early in the pandemic occurred among part-time workers. Part-time workers accounted for 29 percent of the employment decline from the fourth quarter of 2019 to the second quarter of 2020, well above their prepandemic share of employment, at 17 percent. However, part-time workers made up 37 percent of the employment gain from the second quarter to the fourth quarter of 2020. In the fourth quarter of 2020, part-time employment was down by about 6 percent from a year earlier, matching the decline among full-time workers, which was also down by about 6 percent over the year.

Don’t Miss: Do Unemployment Benefits Get Taxed

Unemployment Is High Why Are Businesses Struggling To Hire

Health concerns, expanded jobless benefits and still being needed at home are among the reasons would-be workers might be staying away.

• Send any friend a story

  As a subscriber, you have 10 gift articles to give each month. Anyone can read what you share.

  Give this articleGive this articleGive this article

There are two distinct, and completely opposite, ways of looking at the American job market.

One would be to consult the data tables produced every month by the Bureau of Labor Statistics, which suggest a plentiful supply of would-be workers. The unemployment rate is 6 percent, representing 9.7 million Americans who say they are actively looking for work.

Alternately, you could search for news articles mentioning labor shortage. You will find dozens in which businesses, especially in the restaurant and other service industries, say they face a potentially catastrophic inability to hire. The anecdotes come from the biggest metropolitan areas and from small towns, as well as from touristdestinations of all varieties.

If this apparent labor shortage persists, it will have huge implications for the economy in 2021 and beyond. It could act as a brake on growth and cause unnecessary business failures, long lines at remaining businesses, and rising prices.

Seeking Explanations For The Youth Disadvantage

Why do young people experience a disadvantage in the labor market? A mix of factors should be considered when attempting to answer this question. First and foremost among these is the lack of sufficient economic growth in many countries. The youth disadvantage is strongly and inversely affected by the business cycle: when an economy is expanding, its youth unemployment rate decreases more than the average, while it increases more than average when an economy is contracting. A study from 2012 supports this, by showing that the youth unemployment rate is particularly sensitive to economic and financial crises .

A mix of factors explain this counter-cyclical nature. First, the aforementioned LIFO principle plays a role, as it disproportionately impacts young workers. Second, the LIFO principle is amplified by policies that reduce the cost of firing, either for all workers, as in the Anglo-Saxon countries, or primarily for young workers, as is the case in countries that have implemented two-tier reforms that only apply to the new hires, such as most south and east European countries. If the majority of new hires are made through temporary contracts, it is easy to discontinue such contracts by simply not renewing them. This leads to a situation in which many youth cycle rapidly in and out of employment.

Also Check: Fraudulent Unemployment Claims In My Name

The Unemployment Rate Peaked Above Levels Seen In The Great Recession

The number of unemployed people was 10.8 million in the fourth quarter of 2020, an increase of 4.9 million from a year earlier. In the second quarter of 2020, after the onset of the pandemic, the number of unemployed averaged 20.6 million, much higher than the peak reached in the aftermath of the Great Recession, when unemployment hit 15.2 million in the fourth quarter of 2009.5 The unemployment rate also spiked in the second quarter of 2020 and, at 13.0 percent, was the highest quarterly average ever recorded in the history of the series, which goes back to 1948. Despite rapid declines in the second half of the year, the unemployment rate averaged 6.7 percent in the fourth quarter of 2020, which is nearly twice what it had been in the fourth quarter of 2019.

Effects of the COVID-19 pandemic on CPS estimates

Misclassification of some people in the labor force

Both BLS and the Census Bureau found that, despite this guidance, some people who were not working because of the coronavirus were recorded as having a job and not working for other reasons. Starting in March 2020, BLS began producing an estimate of what the unemployment rate would have been if those with a job but not at work for other reasons had been counted among the unemployed on temporary layoff.

Response rates

Why Is Unemployement So High

Everyone knows that the unemployment situation is very bad, but the official figures understate the problem. In this article Ill outline the severity of the stalled labor market, and explain some of the major causes. According to the Bureau of Labor Statistics , the official civilian unemployment rate in February was 8.9 percent. However, this figure is very misleading in the present environment, because so many potential workers have become discouraged and are no longer seeking work. Just as a retired person, or a stay-at-home parent, isnt normally classified as unemployed, so too does the BLS exclude these discouraged workers from the official count.

John Williams at Shadowstats.com estimates that if we include the short- and long-term discouraged workers, then the actual unemployment rate is currently closer to 22 percent.

Before offering some explanations for this disturbing situation, we should first clarify what unemployment is. There are different ways of defining the condition, but we can capture the typical understanding by classifying a worker as unemployed when he or she is willing to work at the going wage or salary for some categories of jobs, but cant find any employer willing to extend the same offer to this particular worker, even though the employer views the worker as interchangeable with other workers already on the payroll.

Read Also: Can You Get Marketplace Insurance If You Are Unemployed

All Six Measures Of Labor Underutilization Increased In 2020

Each of the six measures of labor underutilization increased in 2020. In the third quarter of 2020, U-1, at 4.9 percent, reached its highest level since the fourth quarter of 2011, before it decreased to 3.6 percent in the fourth quarter of 2020. Because U-1 is a measure of people who were unemployed for 15 weeks or longer, the rate remained low in the early days of the pandemic the U-1 rate increased later in the year, as many unemployed people were not recalled to work as they originally expected, while others lost their jobs permanently and did not find new work, despite searching for work for 3 months or longer.

Alternative measures of labor underutilization

Six alternative measures of labor underutilization have been available on a monthly basis from the Current Population Survey for the United States as a whole since 1994. The official unemployment rate includes all jobless people who are available to take a job and have actively sought work in the past 4 weeks . The other measures encompass concepts both narrower and broader than the official unemployment rate. The six measures are defined as follows:

The other five measures of labor underutilization reached their highest levels since 1994 in the second quarter of 2020.20 Each of the five rates have fallen since their peak in the second quarter of 2020 however, the rates in the fourth quarter of 2020 were still well above those of a year earlier.

What Is The Unemployment Rate

The unemployment rate is the percentage of the labor force without a job. It is a lagging indicator, meaning that it generally rises or falls in the wake of changing economic conditions, rather than anticipating them. When the economy is in poor shape and jobs are scarce, the unemployment rate can be expected to rise. When the economy grows at a healthy rate and jobs are relatively plentiful, it can be expected to fall.

Recommended Reading: How To Get W2s From Unemployment

Who Is Counted As Unemployed

The BLS defines unemployed workers as those who are out of a job and currently available to work, and who have actively looked for work in the past four weeks. It also includes workers who are temporarily laid off but expecting to return to the workforce, whether they have been actively looking for a job or not.

The Unemployment Rate Rose Markedly For Those With Less Education

Among workers ages 25 and older, jobless rates across all education levels spiked to their highest point ever following the onset of the pandemic in the second quarter of 2020 .11 Unemployment rates for people with less than a high school diploma and for high school graduates reached 19.0 percent and 14.9 percent, respectively, in the second quarter of 2020. For those with some college or an associate degree, and those with a bachelors degree and higher, jobless rates in the second quarter were 13.0 percent and 7.5 percent, respectively.

Although these measures improved after the second quarter, they remained about twice as high in the fourth quarter of 2020, as compared with a year earlier. The jobless rate for people with less than a high school diploma was 9.6 percent in the fourth quarter of 2020, 4.1 percentage points higher than a year earlier. The unemployment rate for high school graduates with no college degree and for those with some college or an associate degree increased by a similar amount over the year . The rate for those with a bachelors degree and higher increased by 2.1 percentage points over the year, reaching 4.1 percent in the fourth quarter of 2020. As has historically been the case, jobless rates for those with higher levels of education remained well below the rates for those with less formal education.

Read Also: Do You Have To Be Unemployed To File For Disability

The Unemployment Rate For Veterans Nearly Doubled Over The Year

There were 18.3 million veterans ages 18 and older in the civilian noninstitutional population in the fourth quarter of 2020. Veterans who served during World War II, the Korean War, and the Vietnam era account for the largest share of the veteran population, at 6.7 million, followed by veterans who served during Gulf War era II and Gulf War era I . Four million veterans served on active duty during other service periods, mainly between the Korean War and the Vietnam era and between the Vietnam era and Gulf War era II.15 Among veterans, women accounted for 10 percent of the total veteran population in the fourth quarter of 2020.

In the fourth quarter of 2020, the unemployment rate for veterans was 5.7 percent , up by 2.6 percentage points over the year. The unemployment rate for nonveterans, at 6.5 percent in the fourth quarter, increased by 3.3 percentage points over the year. Among the youngest veterans, the jobless rate for Gulf War-era II veterans , at 6.1 percent in the fourth quarter of 2020, increased by 2.3 percentage points from a year earlier. The unemployment rate for male veterans, at 5.9 percent, increased by 3.0 percentage points over the year, while the jobless rate for female veterans, at 4.7 percent, changed little over the same period.