Unemployment Rate
As of January 2010, the unemployment rate is at 10.1%. Is that a cause for alarm? Well, economists consider that a 5% unemployment rate is full employment. The reason is that people are always changing jobs and this “friction” always stands at around 5%. If unemployment falls under 5%, you will see wages rise and sometimes quickly.
To keep things steady, the government tries to keep the unemployment rate around 5%. In the past, during World War 2, wages increased rapidly and employers did not like that. They made a plan with the Federal government to decrease wages through unemployment policy.
The current rates of unemployment are greatly underreported. People that are discouraged and stop looking for a job are not considered in the statistics. Still, a lot of people are only working part time or had their wages decrease drastically. These numbers are not reflected in the unemployment rate.
One of the reasons that the economic recovery is taking longer than expected is that the statistics being used do not tell the whole story. People do not want to be alarmist, but the real unemployment rate is probably around 20-25%.
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