Unemployment Rates in California and the Macroeconomy - Term Paper Example

Introduction The local unemployment rates that are currently within California are making a difference in how many respond to the economy. Not only is this affecting the cities and counties that are within the region, but are also shaping the macroeconomic features of the nation. Understanding how the unemployment rates in the state are directly affecting other spaces can then provide a deeper understanding of how to change the current conditions from those that are unemployed. More importantly, there is the need to analyze the types of unemployment as well as how the workers are able or unable to receive specific types of jobs. Looking into the different aspects of this and understanding how it is affecting the economy can then provide different relationships to changing the available opportunities that are within the region. Unemployment Rates in California California is an important region to analyze in terms of unemployment rates because of the comparisons of those who don’t have jobs to the rest of the countries. California has the fourth largest amount of unemployment in the nation, with an average of 11.4% of the population not having a steady job. This has increased dramatically from the year 2005, with the average at 4% and now jumping to almost 12%, as seen in the graph below. Graph 1: Unemployment Rates in California: 2005-2010 The highest in the nation is at 13.6% and the lowest unemployment rate carries 4.3%. For California, this shows that dramatic measures need to be taken to change the amount of unemployment in the state. Even though California is ranked at one of the highest percentages from 2009, they have also had one of the largest decreases in unemployment rates with 33,600 individuals who were able to find work within the region. However, it was also noted that the changes in unemployment decreases of 12.4% were specifically related to seasonal adjustments that occur each year. Not only was the increase considered above average, but the unemployment rates in general for California were at a lower average than last year. In August of 2009, there were 13,900,700 individuals in California that were unemployment. In 2010, the rate was 13,827,900, with a difference of 112,800 people that were employed in 2010 (Bureau of Labor Statistics, 2010). The unemployment that is occurring in California is dependent on different industries and the changes that are occurring within the economy. The unemployment and percentage increase by industry is as follows: Table 1: Unemployment By Industry Industry Number of Job Loss in August Percentage Change from 2009 Mining and Lodging 25.6 +3.2% Construction 543 -7.6 Manufacturing 1234,2 -1.7 Trade, Transportation, Utilities 2,569.9 -1.5 Financial Activities 776 -1.7 Professional and Business Services 2,054.4 +1.9% Education and Health Services 1,761.3 +1.3 Leisure and Hospitality 1,481 -0.4 Other Services 480 -0.4 Government 2457.6 -1.9 Mass Layoffs 558 - (Bureau of Labor Statistics, 2010). The industry is one of the factors that are seen with the amount of unemployment that has taken place in California. There are also changes that have occurred in the geographical areas in California. The unemployment rates by major metropolitan areas are seen in the following table. Table 2: Metropolitan Areas Rate of Unemployment Metropolitan Region Percentage of Unemployment Bakersfield – Delano 16% Chico 14.2% El Centro 30.3% Fresno 16.2% Hanford – Corcoran 15.6% Los Angeles / Glendale 13% Los Angeles / Santa Ana 12.5% Madera – Chowchilla 15.3% Merced 18.9% Modesto 17.6% Napa 9.4% Oakland 11.8% Oxnard 11.3% Redding 15.6% Riverside – San Bernardino 15.1% Sacramento 12.7% Salinas 10.8% San Diego 10.8% San Francisco / Redwood City 9.4% San Francisco / Oakland 10.8% San Jose 11.5% San Luis Obispo 10.5% Santa Ana 9.8% Santa Barbara 9.2% Santa Cruz 11.4% Santa Rosa 10.8% Stockton 17.4% Vallejo – Fairfield 12.4% Visalia – Porterville 16.9% Yuba City 19% (Bureau of Labor Statistics, 2010) The area with the largest rate of unemployment is El Centro. The lowest geographical region is Santa Barbara at 9.2% making the median at 12.4% as of August 2010. The highest increase in unemployment is in mining and lodging and the largest decrease in unemployment is in construction. Reasons for Unemployment The changes in the economy within California have also led to the dramatic increases with the amount of unemployment that is currently occurring. One of the highest reasons is because of cyclical unemployment. The labor market fluctuations are causing this to occur at a rapid rate as well as from the recession that has occurred. The jobs are continuously moving in and out of demand as the economy fluctuates with companies being forced to downsize their corporations, then to move individuals back into employment as the economy changes into more demands. The macroeconomy is contributing to this change as the demand for specific supplies continues to decrease, then slowly rises again. Individual companies are forced to move into cyclical unemployment because of the inflow rates that are occurring within the economy. When looking at the largest industries of unemployment, which include mining and lodging, information services and education, specific relationships to cyclical unemployment can be assumed. The amount of demand for mines, such as coal is decreasing with the recession. The amount of travelers is also decreasing because of the decrease in tourism and money available within individual households. The information services and professional services decrease also shows that there is not as much demand in the area of growing businesses that need extra services, specifically because of the relationship to the macroeconomy (Elsby et al, 2009). A second main reason for the unemployment rates in California comes from the seasonal work as well as layoffs that are occurring. Many that are currently working are under temporary conditions based on the demand that is available. This is combined with unemployment rates that are occurring because of demand from the yearly needs. For instance, during the Christmas season, there is a movement of more rates of employment. However, after this demand is over, the layoffs begin to decrease substantially with the lack of need for employment. Other companies contribute to this with downsizing that occurs for short periods of time through layoffs, then the ability to move workers back into the main work force for demands that are needed. Many expect that with the new economy, this will continue to occur as employment is now moving into outsourcing by project and into working on demand for lower prices. These factors are all contributing to many workers not having work available because of the changing business models as well as the continuous fluctuations that are adding into the jobs which are no longer in demand (Levine, 2005). The current problems with the economy are creating new types of unemployment through the demand that is available, leaving many that are able to work with the inability to work. However, another type of unemployment that is contributing to the rates in California comes from those who are unable to work. It is expected that 3-4% of the population will remain unable to work because of lifestyle or circumstances in which they are under. Handicaps, disabilities and women who are pregnant or at home all contribute to a small percentage that is unable to work because of physical conditions. The changes in the labor force then change specifically because of health condition alterations and the way in which several are required to live outside of the main work force (Feasel, Rodini, 2002). The problems of physical health as well as different effects in the economy are furthered by psychological reasons that relate to individuals who are unable to work. When the labor market becomes weak and there are more workers than jobs, it immediately begins to reflect on how one is able to approach getting a job. If one has been laid off or unable to work because of the recession for a period of time, then it leads to discouragement, depression and other mental and psychological symptoms that those out of work begin to develop. As this continues to occur, individuals have the inability to move back into the economy as easily. When going through interviews and other procedures for employment, there is the ability to get discouraged because of the unavailable jobs as well as the high amount of competition that turns away those that are able to work. The unfavorable conditions that many are facing causes them to continue to be left with the economic downturn and to cause employment rates to either remain at a high percentage or to continue to rise (Langdon et al, 2002). Relation to Macroeconomics The different rates that are in California and the reasons behind unemployment are not only contributing to the problems within each locality and region. More importantly, this is directly impacting the relationship to macroeconomics and the trends that are occurring both on a national and international basis. The theory of the Philips Curve is one of the relationships that can be seen from the macreconomic trends and the localities that have exceeding numbers of unemployment. As the amount of unemployment continues to increase it directly affects the amount of monetary sources that are within the economy. This changes the amount available to create both supplies and to have the same amount of demand. If individuals don’t have the capacity to buy as much, then this ultimately affects the amount of demand of other businesses. The lack of contribution then leads to higher amounts of unemployment in other regions because of companies that have to outsource, lay off employees or slow down the amount of production within their business. In this theory, the rate of unemployment and the demand for labor directly affect the level of supply and demand that is available, which changes the money wage rates, consumer demand and other concepts that allow the economy to either rise or fall (Holmes, Smyth, 2000). The relationship to the macroeconomy from California is not only problematic because of the changes in demand and supplies from companies. More importantly, there is an overall change in the spending on a national and international level. The government and companies are then forced to cause inflation of prices and increases in the products that are available. The less that companies are able to work, the more they have to charge for the amount of labor that is provided. As this occurs, more people are able to buy less of the supplies that are needed for the home, causing prices to continue to increase and levels of employment to continue to decrease. Even though this begins at a local level, the national and multinational corporations, manufacturing plants and other providers are ultimately impacted from the changes in the economy. This changes the way in which most work within the economy and alters the available resources at an international level (Murthy, 2002). Conclusion The current levels of unemployment in California show a direct impact that is linked to the macroeconomic state, specifically because of the recession that has occurred. The past five years have noted a dramatic increase in unemployment, specifically which has doubled in size. It can be said that the unemployment is relating directly to the downsizing of companies, layoffs, outsourcing and the lack of supply and demand from the recession. Employees are also having more difficulties through individual and psychological problems that are relating directly from the inability to find a job. The unemployment rates show that it is a direct impact from the national recession that has caused the problems with unemployment, specifically because of the changes in demand for education, knowledge related services and mining and hospitality. The relationship to the macroeconomy is one that is specific to the amount of supply and demand that is available at a national and international level, as well as the prices from inflation that are continuing to cause a loss in employment. References Bureau of Labor Statistics. (2010). Economy at a Glance: California. Retrieved from: http://www.bls.gov/eag/eag.ca.htm. Elsby, Michael, Michaels Ryan, Gary Solon. (2009). “The Ins and Outs of Cyclical Unemployment.” American Economic Journal: Macroeconomics. (1), (1). Feasel, EM, ML Rodini. (2002). “Understanding Unemployment Across California Counties.” Journal of Social Issues (7), (2). Holmes, James, David Smyth. (2000). “The Relation Between Unemployment and Excess Demand for Labor: An Examination of the Theory of the Philips Curve.” Economica (37), (147). Langdon, David, Terence Mcmenamin, Thomas Krolik. (2002). “U.S. Labor Markets: Economy Enters Recession.” Monthly Labor Review (125). Levine, Linda. (2005). “Unemployment Through Layoffs: What Are the Underlying Reasons?” Congressional Research Service. Murthy, Vasudeva. (2002). “Macroeconomy and the Well Being of Low Income Families.” Journal of Economics and Finance (26), (3). Read More