Unemployment in the USA: COVID-19

Unemployment occurs when a person who is actively searching for employment is unable to find work (In-
vestopedia), although in economics there are multiple types of unemployment. These include cycli-
cal unemployment; where a decrease in aggregate demand leads to
an increase in unemployment, structural unemploy- ment; where long-
term changes to industries lead to rises in unemploy- ment (changes in
technology, changes in legislation etc.), and when this affects specific zones of a country, it
is known as regional unemployment. There also exists seasonal unemployment; which is
caused by industries that have troughs and peaks in de- mand, i.e. the tourism industry.
Finally there is frictional unemployment, which occurs
whenever somebody is unemployed and in the process
of searching for an- other job, which leaves
them, at least

for the short term, unemployed. Fried-

man described the natural rate of unemployment as the level
of unemployment that includes frictional, seasonal and voluntary un- employ-
ment, and argued that, if the level of unemployment fell below this natural rate, then inflation would
rise.
Above, the Phillips Curve highlights the inverse relationship be- tween the rate of inflation and the
unemployment rate. I.e. the lower the unemployment rate, the more people are in work and are
contributing to the economy, and therefore the higher the inflation rate.

Figure 1
(Financial Times:US jobless claims surge to record 3.3m as America locks down)

As we can see in figure 1, the weekly unemployment claimant rate has remained between 200,000 and
700,000 reaching peaks during past economic disasters (see 2008 - economic crisis). However, in 2020, this
has peaked due to the coronavirus, at an all time record high of 3.3 million.

The pandemic has also highlighted the importance of data collation between countries: “Early in-
dicators are suggestive of unemployment consequences that vary widely across countries, depending on
their labor market characteristics. Unemployment is particularly responsive to health shocks in the U.S. and
Spain, while the fluctuations are attenuated almost everywhere else.” (Fabio Milani, 2020). This sudden in-
crease in unemployment created a huge supply-side shock, due to the fact that many people found them-
selves unable to get to work, due to declining health conditions or new regulations. As well as this, due to the
harsh increase in unemployment, net household disposable incomes also decreased, which caused a harsh
downturn in aggregate demand, and a record decrease in USA GDP growth.

References

-Fabio Milani: COVID-19 Outbreak, Social Response, and Early Economic Effects: A Global VAR Analysis
of Cross-Country Interdependencies

-https://www.investopedia.com/terms/u/unemployment.asp