Unemployment Economic Growth
Unemployment, as we all know, is the rate of people who
want to work and are actively searching for jobs, but
cannot find any. From the graph above, which describes the rates of unemployment from 2000 to 2015, one can see
that 2010 was the highest point of unemployment. The red
bars describe the times of recession which were from 2001 to 2002 and 2008 to 2009. There was a rise in the
unemployment rate between 2000-2003 and 2008-2011.
The unemployment rate decreased, meaning the economy
was improving, between 2004-2006 and 2011-2015.
After each recession, there exists a trend. Not directly
after, but very soon, the economy will begin to improve and gain its strength back. This is when the rate of
unemployment will decline and people will get the jobs
they have been longing for. The average rate for the data in the graph in between the year 2000 and 2015 is about
6.3 %. Compared to the natural average of 5%, it can be
concluded that this unemployment rate is slightly higher
than that average. This means that the average unemployment rate from 2000 to 2015 was at an unhealthy
rate above the natural average.
Economic growth rate is the measure of gross domestic
product (GDP) in a country; it is the growing rate of the
economy which can be found by examining GDP. There were many spikes in the economy shown in the graph
between the years 2000 to 2015. There were drops in the
economic growth rate in the years of 2000-2002, 2005- 2007, 2008-2009, 2011-2013, and 2014-2015. There were
improvements in the economy between 2003- 2005, 2007-
2008, 2009-2011, and 2013-2014. Once the recessions hit, the economy slowly started to gain speed until another
negative impact hit. The economy will always be a
fluctuating mess, but it is beginning to improve again as
we come into the year 2016.
If we compared this graph to that of the unemployment
rate, then we would be able to see similarities in the fluctuations of each graph. When the economy was getting
worse, the unemployment rate would increase; these two
variables were almost inversely related. The historical rate of economic growth is 3.2%. The average rate of the data
from the graph is around 1.9%. This is a little more than
half of the historical rate. This means that our economy
between 2000 and 2015 is growing slowly, not as fast as
May 9, 2016
the historical rate. Looking at the positive side, it is growing which means the economy is improving and
finally out of the recession of 2008-2009.
Interest rates affect the United States’ stocks and bonds, which can either be good or bad for the economy. The
graph above describes the activity, ups and downs, of
interest rate. From 2000-2003 the interest rates were dropping. Lower interest rates, in turn, make borrowing
funds easier for people. In 2003 all through 2007, the rates
began to increase, but from 2007 to 2015 the rates have continued to decline rapidly until they hit a flat line of .1%.
The recessions of 2001-2002 and 2008-2009 led to
declines in the rates of interest. Higher interest rates slow
the economy and, in turn, make borrowing more difficult to do.
Comparing this graph to the economic growth rate graph, one could see that as interest rates drop, the growth of the
economy is slowing and even beginning to decline. The
average interest rate of the graph between 2000 and 2015 is 1.9%. Since the Federal Funds Rate is a policy variable,
one could not compare any percentage to the average of
the graph because it constantly changes with the
conditions of the economy. The economy is not looking for a specific rate of interest. With high unemployment, or
times of economic decrease, the interest rates should be
lowered. This would encourage people to invest in the economy, thus stimulating it. When the economy is doing
well, interest rates should be increased which would make
borrowing more difficult thus maintaining economic stability. This is an important fact to note, the economy
will maintain its strength and will not rapidly decrease at
any given moment if we keep these rules or ideas in mind
when deciding what to do with interest rates.
Inflation rate is the rise in general prices in the economy, while hyperinflation is the rapid increase of prices. When
prices increase, purchasing power drops. This means that
the ability for a person to buy goods and services decreases
when the price for such goods and services increases.
The inflation rate decreases from 2000 to 2002, and
increases from 2002 to 2005. From 2005 to 2007 the rate drops again, and 2007 to 2008 it increases. Inflation is at a
negative in the year of 2009, then it increases through
2011. Finally, it decreases through 2015 until it reaches .1%. The recessions of 2001-2002 and 2008-2009 both
came with decreases in inflation.
Comparing this to the unemployment graph, one could see
that as unemployment rates are dropping, inflation rates
are increasing. They work together inversely. When
people are getting the jobs they have been looking for, then prices can increase to allow for the wage availability.
This will also make it more difficult for newly employed
people to buy all the goods that they are looking for, thus stabilizing the economy. Inflation rates and the economic
growth rates are similar in that they both increase
simultaneously. The average rate of the graph above from
2000 to 2015 is 2.2%. Now comparing this to the target rate of 2.0%, one could see that the graph’s average rate is
slightly higher than the target rate. This means that prices
are increasing more than they should be, or are desired to be increasing. The difference is only .2%, so it is not that
detrimental to the economy. For more information about
any of the topics discussed here, look for our next newsletter coming soon!