Unemployment Essay Example | Topics and Well Written Essays - 1000 words - 1

Unemployment - Essay Example An unemployed individual does not currently have a job, has sort for a job in the prior 4 weeks and ready for work as defined by the U.S. Department of Labor (1). This is usually denoted as a percentage. Unemployment is a very significant measure or indicator of the economy and serves to indicate how healthy or ailing an economy is. The unemployment rate, which by definition is the ratio of people who are unemployed to the total number of people in the labor market, is the most common measure used to define and size up employment. There are instances when unemployment is voluntary (Gay 30). This scenario occurs when persons opt not to seek employment due to a number of reasons such as low wages in the market. Unemployment generally significantly affects parameters such as inflation and stock prices. What then is the relationship that exists between unemployment and inflation? Market players, such as the Federal government and corporate world usually relate low unemployment rates are attributed to high inflation levels. Low unemployment is consequently related to an increase in the growth of the economy. These market participants also view the reverse as true, which means that an increase in unemployment and a slow economic growth are indicative of a decrease in unemployment. Theoretically, the relationship between unemployment and inflation is explained by the Phillips curve. According to this theory, unemployment and inflation work in opposite direction. Chang asserts that in a period of low unemployment as compared to a period of high unemployment, there are fewer unemployed laborers in the labor market (Chang 10).