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Job Loss, Part of a Down Economy

written by: P Reddy•edited by: Jean Scheid•updated: 6/29/2011

A description of how job loss is part of the economy relates to the current recession. In hard times, job losses are often inevitable and a reoccurring cycle causes less spending which often leads to higher unemployment rates.

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    The Effects of Unemployment

    800px-FEMA - 29783 - Workers unemployed by the freeze in California 

    One of the biggest problems right now is that job loss is part of the economy. Unfortunately there are hundreds of people losing their jobs everyday. Jobs are being cut and thus causing massive layoffs and firings. People are becoming very worried about where this turn is taking the economy and how the people will come out in the long run.

    Although in previous months, the unemployment rate may have gone down, companies are still having to cut jobs back. This has a sour result on the economy as a whole. If there are no jobs, this causes people to live off of unemployment funds which drains those reserves. This also means if there are no jobs, people are not spending money which in turn hurts the economy.

    Since the consumer confidence is down because of job loss, this means no one is purchasing cars or other major purchases. There are fewer home sales as people are unsure about the future of their jobs. When one looks at the economy, consumer spending makes up seventy percent of it. This means if no one is spending money to buy things such as electronics, clothes, or extras, then the economy suffers.

    Reports have shown a decline in the unemployment rate. This is partially due to job hunters giving up the search. Many people have chosen to do things such as go back to school and other opportunities. Another problem with job hunters are the skills needed. When manufacturing companies send their manual labor overseas or turn to more computer-oriented means, the need for skilled computer operators are needed. Due to the job loss, it is harder to find skilled individuals in the job pool.

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    Job Loss and the Economy

    In 2008, a report showed six months of consecutive job losses pushed the country into a deeper stress on the economy. This can become a vicious cycle. People lose their jobs which causes companies to lose revenues. When revenues and commissions are lost, these cause the companies to reevaluate employment needs and job cuts are often the first avenue they turn to. The cycle then starts back over again and adds to the already dangerously impacted economy.

    There is some debate on whether or not the country was in a true recession. Job creations have been down and job losses have risen. The average wage of workers is reducing causing their spending to be reduced. Often, lower wages means people can't keep up with rising costs and this causes people to hold on to what little money they have. In 2008, there were over eight million people out of work and over sixty thousand jobs that had been cut.

    When looking at job loss as part of the economy and the issues those losses brings, it does indeed have an effect on the economy as a whole. Until the cycle of consumers not spending and companies losing revenues ends, the downturn will continue. Hopefully soon, people will see a difference as jobs are created and people are hired back to work. This will be when the economy will start to see a turn for the better.



    Image Credits:

    Wikimedia Commons - BotMultichillT