Unemployment is Lower Than It's Been in Years — Here's Why That Might Not Be a Good Thing
Unemployment claims are applications filed by people who have lost their job, are seeking a job, or have been laid off. After the state government or the federal Department of Labor reviews the application, they determine whether or not the person qualifies for unemployment benefits. These benefits go a small way towards replacing regular earnings for the whole year and help people meet expenses while they search for another job.
Each week, the U.S. Labor Department publishes two important statistics: the number of people who filed for jobless benefits the previous week, and a four-week moving average for new claims. This week, The Department of Labor surprised people when the number of unemployment claims was released. Initial unemployment claims fell to Pre-Great Recession levels (330,500) for the first time in six years.
Economist Joel Naroff says, "The economy seems to be picking up some steam as the labor market continues to improve." The job market and the workforce are both getting better, especially because fewer people are being laid off and more hiring is being done. However, it's still not enough to return the economy to full strength. Over the past three years, the number of job openings has risen almost 50%, but actual hiring has gone up by less than 5%. In simpler words, companies are advertising jobs, but just aren’t filling them. Since employment is rising and the economy is growing, could this mean inflation is on its way — which could mean a rise in interest rates to slow down an overheating economy. This runs the risk of reducing purchasing power, and plunging us back into another recession.
The United States went through its longest and worst economic recession since the Great Depression between December 2007 and June 2009. In order to revive the economy and avoid another economic recession, the government should give some type of incentive to small businesses and small corporations, to motivate them to create more jobs and expand their businesses in their community. This will provide more jobs for those who are unemployed, boosting the economy and lessening the number of applications filed for unemployment benefits.The government and President Obama in particular should really make an effort to lay the foundations for manufacturers to create more well-paying jobs that will contribute to improving our economy.
While some politicians certainly do a good job at making it sound like the employment picture is improving, the majority of jobs created since the Great Recession of 2007 have been in low-wage-paying sectors. Michael Lombardi of Salon says, “Companies have found ways to boost their earnings and cut their costs by reducing their labor force. Sure, these maneuvers make earnings look better; but when you look at their sales, companies are not selling more.”
In other words, although unemployment claims are at the lowest they've been in six years, the U.S. economy is headed in the wrong direction — not an ideal situation to be in just as we're on the verge of recovering from an economic recession. Unfortunately, low unemployment claims don't necessarily mean an improving economy.