Unemployment Impact to the Economy

Unemployment poses many threats to the economic condition of a country. When a particular state in the U.S. experiences sets an all-time high unemployment rate for years, it causes some sort of confusion to a lot of people. It may not mean so much to the average worker, but to someone who knows very well the relationship between unemployment and the national economic output, it will worry him even when he is still working.

When unemployment rates go up, the government suffers. When a number of people are being laid off, meaning they did not quit their jobs voluntary but due to some sort of legal causes such as retrenchment or company bankruptcy, the government will need to provide these workers Unemployment Insurance Benefits until they can secure themselves with new jobs. When the government has to provide unemployment insurance to these jobless people, it will need to spend more money as temporary financial benefits to the unemployed. The longer jobs are unavailable to the unemployed, the bigger the government will need to shell out.

When unemployment rates rise up, the spending power of every household weakens. Instead of spending too much, household will take measures in order to live within their means while its breadwinners do not have a job yet. Thus, retailers will experience losses due to people unwilling to make more than enough purchases. Even the employed will be motivated to save. They will feel some form of job security and the thought of possibly losing their jobs at any time is welcomed.

When the effects of unemployment begin affecting other factors that contribute to a declining growth rate in the economy, recession occurs. It is a condition in which a country suffers from at least two consecutive quarters of dwindling national output due in part of lower purchases made by consumers as a result of decreasing household income.