The Relationship between Unemployment and National Economic Output

When a family member becomes unemployed, the rest of the household suffer. Each member of the family will have to put up with the necessary adjustments that should be made in order to cope with the challenges of lost household income. “Living within available means” become words that will be heard on a daily basis but may be hard to swallow. Unemployment is indeed is a stressful and discouraging scenario even when losing a job was not voluntary.

Every responsible citizen must know and understand that there is a relationship between unemployment and a country’s national economic output. In economic terminologies, national economic output is a country’s Gross Domestic Product (GDP), or the market value of all goods and services produced in a year within a country. In simplest terms, when a country’s GDP is high, it means that the purchasing power of a nation’s citizens is also high. But when the GDP is low, it means that the purchasing power of people has also reduced, which may turn out to be a result of unemployment. When purchasing power is reduced, it will then affect the outcome of businesses because lesser people will buy their goods and services. A decline in the GDP for two or more consecutive quarters will then cause recession that is often accompanied by a decline in stock market investments, increasing unemployment rate, and decline in housing market. However, a purchase made through loans is another story. As evident in the recent economic downturns in the United States, unnecessary concepts used to artificially finance purchases through loans or refinancing have caused a dramatic loss for many banking institutions which then forced them to file for bankruptcies and close down operations. Thus, the loss of thousands of jobs came into place.

As you can see, the effects of a country’s GDP will also affect unemployment rates, which are calculated on a monthly basis by the Bureau of Labor Statistics. There is a close relationship between the two. Understanding both areas will motivate us, both as employees and consumers, to practice a culture of responsibility: getting the right job, living within our means and purchasing products that we can actually pay.