econ-Journal19

econ-Journal19 - number was later revised to a loss (CNN...

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Duc Hoang – ECON210 Journal – Unemployment rate and Recession Date: 10/24 The   unemployment   rate   is   defined   as   the   percentage   of   the   labor   force   that   is  unemployed. Economists say the rise of the unemployment rate can almost always be  contributed to by a recession. Even as the economy rises and jobs are added to the  economy the unemployment rate may still rise as well. This is due to the fact that the  two numbers are generated from different surveys. The unemployment rate comes from  a survey of households, whereas the payrolls data comes from a survey of businesses.  Also, that payroll data is subject to dramatic revision. For example, the government’s  initial reading of growth outside the farm sector in March found 58,000 new jobs, but the 
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Unformatted text preview: number was later revised to a loss (CNN 2008). Gerard Jackson has a theory as to why a recession changes the unemployment rate so much. The failure to understand the forces that result in succeeding recessions being accompanied by higher levels of unemployment is due to the acceptance of two economic fallacies: treating money as neutral and capital as homogeneous. If money is neutral, that will only change real output and the price level. Hence, changes in money supply will only misdirect production. It also follows that if capital is consistent (meaning that all capital goods are perfect substitutes for each other) bottlenecks cannot occur and capital cannot be lost through malinvestents. Source: gerardjackson .com...
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