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Unemployment hits record high in the US



The United States Bureau for Labour Statistics recorded an unemployment rate of 20.6%, which is the highest ever recorded since 1934. 

Due to the Covid-19 pandemic, the aggregate demand in countries all around the world are falling. The world's largest economy and the country which has the highest number of cases of Coronavirus has seen a surge in the unemployment rate. 

The United States is the world's largest exporter of goods after China and the fall of demand for goods all around and the world and slowdown in international trade has led to most industries in the United States coming to a halt or reducing the production to meet demand. Since reducing supply requires labourers to be made redundant and hence increasing unemployment. Services such as restaurants, movie theatres and public transport are not in demand and hence workers from these sectors are also being made redundant.

A rise in unemployment levels is a bad indicator and comes along with a slowdown in the economy. The people who are now unemployed may have no source of income and decide to spend less which reduces the demand for goods even more and producers may further reduce supplies.

The government may have to intervene in order to keep the economy running and help those who are unemployed, a bill has been put through the congress for $484 Billion which will pay the unemployed, however there will be an opportunity cost for this and the government would have to reduce spending in other areas such as education or defence. However the stimulus package will surely reduce the impact of the virus. Nevertheless, once the pandemic is over the government could intervene and start construction projects in order to create employment and improve the infrastructure.

Image source fortune.com

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