Contraction (economics) - Impacts - Unemployment


Unemployment is particularly high during a recession. Many economists working within the neoclassical paradigm argue that there is a natural rate of unemployment which, when subtracted from the actual rate of unemployment, can be used to calculate the negative GDP gap during a recession. In other words, unemployment will never reach 0 percent and thus is not a negative indicator of the health of an economy unless it is above the "natural rate," in which case it corresponds directly to a loss in gross domestic product, or GDP.

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The full impact of a recession on employment may not be felt for several quarters. Research in Britain shows that low-skilled, low-educated workers and the young are most vulnerable to unemployment in a downturn. After recessions in Britain in the 1980s and 1990s, it took five years for unemployment to fall back to its original levels. Many companies often expect employment discrimination claims to rise during a recession.

Read more about this topic:  Contraction (economics), Impacts

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Famous quotes containing the word unemployment:

    When a great many people are unable to find work, unemployment results.
    Calvin Coolidge (1872–1933)

    Give a scientist a problem and he will probably provide a solution; historians and sociologists, by contrast, can offer only opinions. Ask a dozen chemists the composition of an organic compound such as methane, and within a short time all twelve will have come up with the same solution of CH4. Ask, however, a dozen economists or sociologists to provide policies to reduce unemployment or the level of crime and twelve widely differing opinions are likely to be offered.
    Derek Gjertsen, British scientist, author. Science and Philosophy: Past and Present, ch. 3, Penguin (1989)

    ... of all the aspects of social misery nothing is so heartbreaking as unemployment ...
    Jane Addams (1860–1935)