A Basic Explanation behind Unemployment

The recession in the United States that began as early as 2001has caused the unemployment rate to rise to as high as 10%. An ideal unemployment rate that does not create a huge negative impact to a nation is at 6%. Recession and unemployment rate become huge discussion over the news and on discussion tables. If for example you are among those workers laid off from a job, do you truly understand why it all happened? Or are you also among those people who clearly do not understand a thing about the business economy that it seems your main focus is your company being selfish and rude for kicking you out rather than the other employees who have remained?

There are many reasons that contribute to an increasing unemployment rate. No business entity would ever wish to reach a point where they need to downsize or worse, shut down operations due to losses incurred brought about by dwindling economy. Specific trends in business can largely affect the outcome of many businesses as well as other factors. Think about what happened to The Lehman Brothers. No one would have ever expected that they were losing. We never had the slightest idea that returns on the loans they gave out in numerous financing were very slow. They were losing billions of dollars in assets due to mismanaged financing schemes in the purchase of goods and services from the real estate or credit card industries. They were out lending money only to learn in the end that not all people can pay on time. Economic downturns such as a recession indeed cause unemployment. For example, when Lehman Brothers filed for bankruptcy, they had to initially discharge 1,200 employees in the first phases of their bankruptcy.

Another obvious reason for unemployment is rapid changes in technology. A business for example which thrived for some years with human workforce can be replaced by computers eventually. A form of technology that made millions of money 10 years ago may not be doing well that much today because of new advancements. Thus, some people lose their jobs, but attempt to find newer ways to use their skills or learn new techniques.