Labor Economics Research Paper

Pages: 10 (3344 words)  ·  Bibliography Sources: 7  ·  File: .docx  ·  Level: College Junior  ·  Topic: Economics

Labor Economics -- the Ripple Effects of Unemployment

The litany of dry unemployment data read from a teleprompter by an attractive, well-groomed cable TV newsreader tends to go in and out of the ears of many Americans. Those out of work probably don't want to hear any more to contribute to their own personal misery. Those who are employed may shrug shoulders and ignore the statistics. But beyond the hard cold facts of an American economy where 9.8% of workers are unemployed, what are the ripple effects of unemployment? What are the many subplots that are spin-offs from unemployment during a prolonged recession? How do politicians and political parties respond to various stressors and pressures vis-a-vis unemployment? These questions and others will be addressed in this paper.

The current unemployment facts

According to the U.S. Department of Labor's (DOL) Bureau of Labor Statistics, as of November the unemployment rate went up slightly to 9.8%. The unemployment rate had been steady at 9.6% during the three previous months. The actual number of unemployed persons was 15.1 million in November, and that breaks down in several ways among major worker groups.

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For adult men the unemployment rate is a flat 10%; for adult women it is 8.4% (DOL). Ethically speaking, 8.9% of Caucasians are out of work; 13.2% of Latinos (the DOL refers to Latinos as "Hispanics") are unemployed; for African-Americans the unemployment rate is 16%. The rate of unemployment for teenagers' is 24.6%, down slightly from the previous reporting period. For Asians the jobless rate was 7.6% (DOL).

TOPIC: Research Paper on Labor Economics Assignment

The temporary job market had a ripple effect in November, the DOL reports. For those unemployed, the number of job "losers and persons who completed temporary jobs" rose by 390,000 to 9.5 million in November. The number of "long-termed unemployed" -- that is, those who have been out of work for 27 weeks or more -- stood at 6.3 million and in fact accounted to 41.9% of the unemployed. As for the civilian labor force "participation rate," it held at 64.5%, the DOL data reveals. The number of persons who work as part time employees -- for economic reasons -- was 9 million, and in November about 2.5 million people were "marginally attached to the labor force" the DOL explains, that's up from 2.3 million in 2009.

What does "marginally attached to the labor force" mean? On page two of "The Employment Situation -- November 2010" explains that these particular individuals were not in the labor force but they did want to work and they looked for work at some point over the last 12 months. Another labor statistic that the DOL uses is "discouraged workers"; there were 1.3 million of them in November, up from 421,000 in November of 2009. Discouraged workers in this case are those "not currently looking for work because they believe no jobs are available to them," the DOL points out on page 2.

Specific industries within the labor market

The healthcare industry added about 19,000 jobs as of November, and 8,000 of those hired are working in hospitals (DOL). Mining-related jobs "continued to trend up" in November, the DOL reports; 6,000 jobs were added in November and since November 2009, the mining industry has added 74,000 jobs. "Non-farm payroll employment" experienced no change in November (there are 39,000 people working in that field).

The "temporary help services" added 40,000 jobs in November, that is up by 494,000 since September of 2009 the DOL notes. The retail trade field lost 28,000 jobs in November, mostly in department stories (-9,000) and furniture and home furnishings outlets (-5,000). Another sector of the economy, manufacturing, lost jobs, 13,000 in this case. And the DOL (p. 2) also adds that the average workweek for "all employees" that work on "private non-farm payrolls" held steady in November at 34.3 hours albeit the workweek for those in manufacturing stayed the same at 40.3 hours. Finally, the average hourly earnings of all workers in non-farm payrolls actually went up by 1%, the DOL continues (p. 3); that raises the non-farm hourly rate to $22.75.

The road to economic recovery is not going to be on a smooth fast track, according to the U.S. Industry Quarterly Review. That road will be "long" and workers will be "granted below-average wage growth" for at least the next two years. Since December 2007, the U.S. economy has lost more than 8 million jobs. The economic downturn and resulting loss of jobs hasn't just effected the blue collar workers and laborers; the U.S. Industry Quarterly Review reports that the unemployment rate for those who have graduated from college "has more than doubled from 2% at the close of 2007" and it's near 5% now.

Loss of jobs results in tens of thousands of home foreclosures

Another ripple effect of the current state of affairs regarding unemployment in the U.S. is that when families lose their principal source of income in too many cases they are being forced from their homes. In fact in the third quarter of 2010 some 288,345 properties were foreclosed in the U.S., according to Fox News. In this past quarter (July-September) lenders "seized more U.S. homes" than in any three-month window time since the housing market collapsed in 2006, Fox explains. Using data provided to the news media by Reality Trac Inc., a listing service for foreclosures in the U.S., Fox explains that in the previous quarter (April-June) there were 270,000 foreclosures and hence the trend is clearly up, not down, for families losing homes.

The October news story by Fox reports that through the first nine months of 2010, banks have seized "more than 816,000 homes"; and if the trend continues, which it seems to be doing, U.S. banks are on a path to kick families out of a total of 1.2 million homes by the end of the year. The story goes on to explain that there is an ongoing nationwide investigation -- attorneys general in all 50 states are involved -- into the reasons for the massive amount of foreclosures. The ramifications that banks and other lenders must face are likely confusing to homeowners who want to stay in their place of residence. The Fox story quotes Rick Sharga with Realty Trac saying that even if state officials can somehow force banks to stop evicting homeowners and taking back homes through foreclosure, the homes will eventually be repossessed anyway. "They simply won't be repossessed as quickly. We're simply delaying the inevitable," he added.

Experts are saying that if lenders stop "seizing homes, the foreclosure delays could last well into next year" which could have a "severe effect" on home sales and the prices of those homes. Why? The delay in foreclosures in late 2010 -- assuming those homes would be foreclosed eventually anyway -- according to Sharga would mean that "You would virtually guarantee that tens of thousands of properties would miss going to market in time for the spring, which is the peak buying season for real estate" (www.foxnews.com).

The re-sale of homes that had been foreclosed made up "18% of all U.S. home sales" in September 2010, Fox goes on. The following sentence from page 2 of the Fox news report restates the reality that was expressed earlier in this section: "Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures this year" (www.foxnews.com).

What is life like after foreclosure?

Marilyn Kennedy Melia -- writing in the Website Bankrate.com -- explains the consequences of foreclosure and quotes from Ohio State University research scientist Jay Zagorsky. "While there is considerable pain," Zagorsky explains, "most foreclosure victims will eventually become homeowners again" (Melia, 2010, p. 1). That is not likely to be of much comfort to a family that was foreclosed in December with temperatures in the teens and a snowstorm on the way. Melia says the "record-breaking foreclosure statistics are coming out with numbing frequency," so with the cold winter weather and "numbing" statistics, what can a family do once the bank has kicked them out of their home?

The consequences, Melia continues, start with the obvious: finding a new home. But without adequate cash to put down as a deposit on a rental, and with a foreclosure serving as a black mark in one's credit report, finding (and affording) an appropriate apartment becomes problematic. Melia suggests that those who are being foreclosed but have an FHA-insured loan should investigate the "cash for keys" program; that is, if the home being foreclosed is spotlessly clean when the family vacates, that family is eligible for a $1,000 check, which can certainly help during the search for temporary lodging (www.bankrate.com).

The second consequence is also obvious: the credit fallout that results from a foreclosure. The interest rate on a credit card held by a foreclosed owner "could…jump to very high levels -- as much as 30%," Melia writes, quoting a consumer education expert, John Ulzheimer. Oh but there is a silver lining around that dark credit cloud, Ulzheimer… [END OF PREVIEW] . . . READ MORE

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