Week 2 Discussion 1&2 Responses
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BUS626Week2Discussion2ClassmateResponse.docxWeek 2 - Discussion Forum 2
Guided Response: Respond to at least two of your fellow students’ and to your instructor’s posts in a substantive manner and provide information or concepts that they may not have considered. Each response should have a minimum of 100 words. Support your position by using information from the week’s readings. You are encouraged to post your required replies earlier in the week to promote more meaningful and interactive discourse in this discussion forum.
On this Document there two classmates with discussion that needs to be response. Jason Stack and Ashley Thiberville
Jason Stack
Unemployment
The term unemployment is often a word that make a person uneasy, especially in today's COVID-19 effected economy. However, we don't often think about what this percentage incorporates. According to Gwartney et al. (2019), the unemployment rate is the percentage of people of the civilian workforce above the age of 16 that do not have a job, are available for work, and have been actively seeking employment within the past four weeks (pg. 8-2). Additionally, this doesn't include those who are not actively seeking employment such as students, household workers, disabled, retirees, or those that stopped looking for employment. Understanding what is included and excluded in the calculation of the unemployment rate, we can why the unemployment rate is such an important metric for the U.S. economy.
The unemployment rate is one of the critical metrics economists used to measure the health of the economy. Gwartney et al. (2019), suggest that employment and output are closely linked, and their relationship point toward the location of where a nation is in its business cycle. The business cycle is a reflection of a nation's economic growths and slowdowns over time, which reflects the real output (Gwartny et al., 2019, pg. 8-1a). Therefore, the relationship between actual output and unemployment can reflect the position in the cycle. For example, figure 1 shows the unemployment rate of the United States for 2019. The unemployment rate is trending downward, indicating a higher percentage of the civilian workforce is employed, the output is increasing, and economic growth is rising. Respectively, if the opposite were to occur over the next few months due to the COVID-19, unemployment would increase, output would reduce, and the economy would be leading into a slowdown period.
With such a heavy reliance on the unemployment rate percentage, there seems to be some question as to its accuracy. Buss (1986) suggests that the U.S. Bureau of Labor Statistics (BLS) uses secondary or administrative data sources, such as tax records and employer surveys, a process requiring a great deal of estimation, adjustment, and inference to calculate the unemployment rate (pg. 241). An alternative method of reporting unemployment rates offered by the BLS, such as the U-6, includes part-time workers and marginally attached workers for the past 12 months (Gwartney et al., 2019, pg. 8-2). Additionally, the employment/population ratio is a reflection of the number of employed people divided by the population (aged 16 and older). This is another variation that is less subjective toward classifications and could offer a more accurate estimation of employment (or unemployment) and its representation to the business cycle.
Thanks,
Jason Stack
References
Buss, T. F. (1986). Assessing the Accuracy of Bls Local Unemployment Rates: A Case
Study. ILR Review, 39(2), 241. https://doi-org.proxy-library.ashford.edu/10.1177/001979398603900206
Gwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D. A. (2018). Macroeconomics:
Private and public choice (16th ed.). Retrieved from https://www.cengage.com
National Employment Monthly Update. (n.d.). Retrieved April 15, 2020,
https://www.ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx
Ashley Thiberville
Unemployment is calculated by dividing the number of people unemployed by the number of people in the labor force (Gwartney, Stroup, Sobel, & Macpherson, 2018). The labor force includes civilians aged 16 or older who are employed or seeking employment, it does not include military personnel, those in school, retired or disabled (Gwartney et al, 2018). The labor force is simply those over the legal age to work and are actively seeking employment or are currently working, the idea being that including those that are not able or not seeking employment does not give an accurate picture of unemployment.
The past 3 fiscal quarters of the US have seen unemployment decreasing. Q2 2019: 3.5%, Q3 2019: 3.7% and Q4 2019: 3.3% (U.S. Bureau of Labor and Statistics, 2020). The unemployment rate is important in business as it is a direct indicator of economic growth or recession (Gwartney, 2018). The unemployment rate is directly related to the economy and generally shows how healthy a countries economy is or if the economy is steadily growing. The GDP and unemployment rate generally mirror one another, if GDP is increasing, generally jobs will increase, lowering the unemployment rate (Ostrup, 2000).
Cyclical employment is a natural ebb and flow of unemployment rates based on demand for goods (Gwartney et al, 2018). The unemployment rate will vary as demand for products and services varies over time. The demand for labor generally increases around the holidays as there is more demand for workers to produce and sell goods to consumers.
Gwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D. A. (2018). Macroeconomics: Private and public choice (16th ed.). https://www.cengage.com (Links to an external site.)
Ostrup, F. (2000-04-13). “Money and the Natural Rate of Unemployment.” Cambridge University Press. https://ebookcentral-proquest-com.proxy-library.ashford.edu/lib/ashford-ebooks/reader.action?docID=202382 (Links to an external site.)
U.S. Bureau of Labor and Statistics. (2020). Unemployment Rate. https://data.bls.gov/pdq/SurveyOutputServlet
