The U.S. Department of Labor reported that Michigan's unemployment rate in 2009 rose to 15.2%, becoming the first state in 25 years to suffer an unemployment rate exceeding 15%. Michigan has been battered by the collapse of the auto and housing industries, and has had one of the highest unemployment rates in the country over the past several years.
Why is the reality of the unemployment problem in Michigan actually worse than the statistic of 15.2%?
The U.S. Bureau of Labor Statistics uses various measurements to calculate the rate of unemployment. The measures are:
- U1 is the percentage of civilian labor force who have been unemployed for 15 weeks or longer.
- U2 is the number of people who lost jobs or completed temporary work as percentage of civilian labor force.
- U3 is the number of total unemployed people as a percentage of civilian labor force. The unemployed people are those without jobs and have been actively looking for work within the past four weeks. U3 is the official unemployment rate that is reported which is 15.2 % in Michigan.
- U4 consists of the unemployed people described in U3 plus discouraged works as a percentage of civilian labor force. Discouraged people are those who do not have jobs are not actively looking for work because they think that the current economic conditions cannot allow them to get employed.
- U5 is the number of people described in U4 plus marginally attached workers as a percentage of civilian labor force. Marginally attached workers are the unemployed people who are not actively looking for work for other reasons apart from economic reasons.
- U6 is the number of people described in U5 plus part-time workers who would like to work full time but cannot due to economic reasons as a percentage of civilian labor force (Figure 1.2. Broader measures of young unemployment," n.d.)
The unemployment rate in Michigan is likely to be worse than 15.2 because it only accounts for u3 measurement. The real unemployed people include the discouraged, the marginally attached workers and the underemployed in the country. Including these figures would dramatically increase the rate of unemployment from the 15.2 as indicted.
Is the increased unemployment frictional, structural, or cyclical? Please explain your answer.
The increased unemployment is cyclical. This is unemployment due to reduction of effective demand of the produced goods. Hence, companies have to reduce their total output. As a result, companies need less people to work for them and the rate of unemployment rises. In Michigan, the auto and housing industries are undergoing a recession, therefore, causing an increase in unemployment in the country.
Frictional unemployment is due to the time it takes to match an employee to an employer. However, there are job vacancies that match the number of the frictionally unemployed.
Structural unemployment occurs when there is a mismatch between the unemployed and the demand for specific type of workers mainly due to required skillset ("Unemployment Types: Frictional, Structural and Cyclical Unemployment," 2014).
How has unemployment changed in Michigan in the past decade?
The unemployment rate in Michigan has been on the decline for the past decade. In 2009, the unemployment rate was at 13.7%, the highest it has been in the recent past ("Michigan - Unemployment rate 1992-2018," n.d.). In 2019, the unemployment rate is down to 4%, indicating a significant decline over time. This shows that there is a boom in the economy and industries are increasing their output and hence hiring more people.
Figure 1.2. Broader measures of young unemployment. (n.d.). doi:10.1787/888932893981
Michigan - Unemployment rate 1992-2018. (n.d.). Retrieved from https://www.statista.com/statistics/189438/unemployment-rate-in-michigan-since-1992/
Unemployment Types: Frictional, Structural and Cyclical Unemployment. (2014, April 21). Retrieved from http://www.yourarticlelibrary.com/economics/employment-economics/unemployment-types-frictional-structural-and-cyclical-unemployment/37840
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