Why is unemployment so high in the United States right now, and why are companies not hiring? Even with all the tax incentives for hiring and the Federal Government Stimulus being pumped into the economy many people are left unemployed. Most of these workers are very qualified and very motivated, just not many companies are hiring right now.
I personally think that their are two major reasons for this economic situation to exist. To begin with, the small to medium sized companies are the sector of the economy that create jobs. These companies right now do not know how much the Patient Protection and Affordable Care Act is going to cost them for the employees they have right now. The original bill spans just over 2000 pages, and most people still do not know about every thing in that piece of legislation. Many employers are worried that they may have to trim their work forces in the future so they can afford to comply with the new rules.
The second reason may be larger than the first. Most people in the US right now have a feeling of unease, we as a nation don’t see a huge turn around in the world economy or even in our nation. People without jobs can’t create much demand for goods and those consumers that do have jobs don’t feel like spending the money they make and therefore they don’t create extra demand either. The Federal Reserve has weakened the dollar so much so that the prices for energy and food have been on a steady climb, almost everything has increased in price. The Federal Government claims that inflation is mild right now, however those of us that live in the real world know better. With more money leaving the country for energy costs and with the price of food jumping every couple of months, all of consumers extra income is gone, and that reduces demand for goods and services. If there is no extra demand for goods and services then no company is going to expand their work force no matter what the incentives are.
Can this situation be changed? It does seem like a large circle, as demand for goods and services drop so do the numbers of people that are needed by employers, as these people loose jobs more demand drops and so on. What can be done?
I feel that the price of energy in the United States has to drop before we will see a large scale recovery. If fuel prices drop so will the price of food. If consumers have more money to spend they will create demand for goods and services and the economy can expand. Until we see a turn around in energy policy and employers find out exactly what the new heath care law will cost them, I don’t think we will see a huge recovery.
Source: Patient Protection and Affordable Care Act
Unemployment Rate
Federal Reserve