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Even though the level of unemployment may be high in a country the economy is still going to experience a healthy growth rate. This is because of strong market returns that are usually followed by this unemployment. From recent history it is clear that high rates of unemployment have not barred future real GDP growth. Another fact is that high level of unemployment has led to strong and relatively stable stock market returns. High unemployment is a precursor of strong economic growth and good stock market returns this is because of the political pressure on policy officials, the reemployment of unemployed resources, the aftermaths of unemployment, low inflation and restoration of confidence in the economy. Therefore high levels of unemployment are beneficial in the long run to the economy and stock market returns.it is therefore advisable to by stocks rather than worry about the employment levels. (management, 2010)
Recovery from the great depression of the 1930’s
The depression that occurred in the 1930 was very severe and also lasted for a long time. Its duration was caused by reduction in production and as a result of this reduction of jobs, which lead to an increase in unemployment rate. Most depressions are signified by unemployment rates above 15%. Increase in unemployment rates is as a result of high labor productivity and lower production rate, but not due to recession. Usually after recession the rate of unemployment may not continue to rise but it would not decrease. Showing that a recession may end but the depression it created is not likely to end. After the depression in 1930 the unemployment rate remained higher still even though the economy fully recovered. This was because although the GDP was growing so was the labor force. This depression also caused reduced investment due to the uncertainty it caused. The economy recovered from the depression in 1930 due to the Second World War which caused high demand for goods and services. (Watkins, 2006)
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Key economic measures of the United States economy
Economic indicators are statistics that measure economic trends and growth. The rate of unemployment and the gross domestic product are indicators that provide a quantitative analysis of the economy. In the United States, Jobs have shown steadily improvement even though the employment rate is still high. This is caused mainly by the recession that the economy is undergoing. As a result many people have become defendant on the government s unemployment benefits. They also tend save most of their income. This results in slow economic growth because of low rate of consumption. Hence the small increase in gross domestic product of about 2%. However this increase does not help create jobs to control the unemployment rate. Inflation is also an important economic indicator; it helps to measure economic activity. Inflation is usually low in an economy that is recovery from recession. At a rate of 2 to 3 percent inflation will support economic growth. This is important to alleviate unemployment rates. (moneyrates, 2010)
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