Principles of Macroeconomics

Principles of Macroeconomics: Data Exercise

Part 1: Unemployment

Unemployment is the situation when individuals with the ability and will to work cannot get job opportunities for the given time under the analysis. The unemployed people do not earn income, and hence they can only meet their needs through past savings, the social transfer from the government, and or they become dependent on other people. The month under the analysis is October 2016, in which the total nonfarm payroll employment increased by 161,000. The rate for the month was 4.9%, with at least 7.8 unemployed persons (Bureau of Labor Statistics, 2016a). The rates for the unemployed adult men, adult women, and teenagers were 4.6%, 4.3%, and 15.6% respectively. The unemployment rates for whites, Blacks, and Asia were 4.3%, 8.6%, and 3.4% respectively. According to Bureau of Labor Statistics (2016a), there was little change as far as the unemployment is concerned during the month.

Measuring unemployment is a complicated undertaking because of two reasons. First, the statistics arise from the individuals reporting to be in the search for employment, while as some may give up in the search whereas others may get employment. Therefore, keeping an updated data is demanding. Secondly, individuals who are homemakers and in school and who are willing and able to work are not included in the list of the unemployed people.

It is worth noting that unemployment is an economic problem because of two primary reasons. First, it is a total economic waste as the labor force expected to be engaged in the production of goods and services is idle. Secondly, the unemployment leads to increased economic dependent where the government spends more resources on social unemployment transfer (Carlberg, 2012). As a result, funds meant for other development and public use are utilized in these unproductive ways. The non-economic effects of unemployment include increased crime, homelessness, and substance abuse. The losers from unemployment comprise the unemployed people who do not earn income and the government due to increased expenditure on social transfer programs.

Part 2: The Inflation Rate

Inflation regards the increase in prices of goods and services in an economy. The rise in the inflation rate leads to the decline in the purchasing power of the money. The month in which the analysis is conducted is September, the year 2016 where the CPI-U for the month is an increase of 0.3%. The overall index rose by 1.5% over the last 12 months. Compared to the previous month, the CPI-U increased from 0.2% to 0.3%, which implies that the price index recorded an increase (Bureau of Labor Statistics, 2016b). The inflation rate affects different commodities and services in various ways. As such, some commodities experience a price increase while others record price decrease. The categories of goods or services that had an average decline in price levels include food at home; beef, fruits and vegetables; and nonalcoholic beverages. The food and home index fell for the fifth consecutive months. In September, the index fell by 0.1 percent. In this case, the index for the beef, fruits and vegetables; and nonalcoholic beverages decreased by 0.5%, 0.3%, and 0.4% respectively (Bureau of Labor Statistics, 2016b). It is clear that the two items with the greatest price decrease were beef and nonalcoholic beverages.

Inflation can benefit or affect individuals and firms negatively in an economy. In this case, those who save their money may experience depreciation in value since by the time they withdraw their money for use, the value of the deposit might have been reduced significantly. Wage earners are the other losers to inflation; the salaries and allowances take longer before being adjusted to rise in the price index (Carlberg, 2012). The debtors are gainers to inflation; they pay back their loans when the value of the money they borrowed is less. In fact, the government as the largest debtor in an economy becomes a beneficially. In fact, the state pays the public debtors when the value of money as borrowed has declined.

Part 3: Unemployment Data by Labor Force Groups and Duration

Table 1: Civilian unemployment rates: 1995, 2000, 2005 and 2015

Table 2: Data on the duration of unemployment in 1995, 2000, 2005, and 2015

The unemployment rate and duration decreased in 2000 from 1995, which could be associated with the recovery from the 1990s recession. On the other hand, the rates decreased in 2015 from the 2005’s records (Economic Report of the President, 2016). In this case, the improvement was associated with recovery after the late 2000s.

Companies have their operations and profits adversely affected during recession periods. In such a time, the businesses are unable to sustain a high cost, which implies that cutting costs through downsizing is inevitable. The situation was experienced in early 1990 when many companies retrenched a large batch of employees. In fact, this affected the unemployment duration because many of the companies scraped the positions and hence during the recovery those who turned unemployed could not get back their jobs (Carlberg, 2012). Therefore, it indicates that a large number of people had to stay unemployed longer.

The implications of changes in demography in employment depend on the trend and proportions of the unemployment among the groups concerned. From the civil employment data, teenagers and minorities have a higher unemployment frequency than the general population (Carlberg, 2012). An increase in the population of the two groups is expected to increase the rate of unemployment naturally. In the future, the unemployment rate in the United States will rise.

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