Thursday, April 26, 2012

Economic Growth and the Unemployment Rate

Source: Congressional Research Service, via Federation of American Scientists

A persistently high unemployment rate is of concern to Congress for a variety of reasons, including its negative consequences for the economic well-being of individuals and its impact on the federal budget (i.e., deficit growth due to lower revenue and higher expenditures). The unemployment rate was 9.5% when the economy emerged from the 11th postwar recession in June 2009. It climbed further to peak at 10.1% in October 2009. The rate then slowly declined before stalling at about 9.0% for most of 2011. Although the unemployment rate has resumed its decline, at slightly above 8.0% in early 2012, it remains at an historically high level.

The slow rebound of the labor market has prompted calls for new measures to stimulate economic growth to avoid a so-called double-dip recession, such as occurred during the early 1980s. The economy contracted in July 1981, 12 months into the recovery from the January-July 1980 recession. The unemployment rate had not fallen to its pre-recession level before the 1981-1982 recession began. Some observers have from time to time expressed concern that another shock (e.g., the slowdown of European economies) might push the nation back into recession.

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