Thursday, August 21, 2014

This Increase in Unemployment is Good News for Job Seekers

Reports by the Department of Labor this past month (July 2014) showed an increase in unemployment. However, unlike previous reports, the number of workers losing their jobs was negligible.

Rising unemployment is bad news for the economy and especially bad news for job seekers as it indicates that employers are reducing their workforce rather than expanding and seeking additional workers.

However, as a result of the way the U.S. Department of Labor (DOL) defines unemployment, an increase in unemployment can be viewed on occasion as good news for job seekers.

How is that, you ask?

According to the DOL an unemployed person is one who is both not working AND is actively looking for work.

Once an individual who is not working gets discouraged and STOPS looking for work he or she is no longer officially considered to be unemployed.  For government statistical purposes they are no longer in the workforce and thus in the same class, employment wise, as young children, full time students, retired people, etc. who are not gainfully employed and receiving a pay check.

Thanks to things like savings, unemployment compensation, food stamps, income from a working spouse, etc. many people are able to scrape by without a job. 

These people were not necessarily lazy.  Rather, they simply accepted the reality that there were no jobs available and decided to hunker down and ride out the economic storm.  Also, depending upon the amount of resources (noted above) available for support, many were able to afford to patiently wait for the right type of job to come along - a job similar in pay and stature to their previous position.

The recession also forced employers to become more efficient and able to maintain or increase the output of their goods or services with the same or fewer resources.  However, there are limits to efficiency and at some point expanding output further to meet growing demand requires more resources including labor resources.

Our economy appears to have reached the point where employers are both more confident in the economy's continued growth and face the need to begin hiring again in order to keep pace with that growth.

The result is that hiring has started to increase and as the discouraged workers, who previously stopped looking for work, have begun seeing family members, friends and neighbors suddenly finding jobs, they too are deciding to begin looking again.  Once these previously discouraged workers begin actively looking for work they are considered unemployed once more.

With employers hiring rather than laying off workers the current swelling of the ranks of the unemployed is the result of discouraged workers re-entering the labor force rather than the result of more layoffs.

This is why the recent increase in unemployment numbers that were not accompanied by increases in layoffs is good news for both the economy and for those wanting to work.


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