Question

why does the employment rate remain above zero percent during economic expansions?

Answer 1

We can often experience high unemployment rates during periods of strong economic growth. First, structural unemployment may occur. It happens when the unemployed are insufficient or unable to fill job vacancies. For example, in high-tech industries, a booming economy may have an increasing number of jobs, but many unemployed people may not have the right skills for this job. Additionally, regional poverty could be seen. This happens when the economy booms in the south, but unemployed workers in the north are unable or unwilling to move to the south (for example, housing difficulties in London where jobs are available).

Frictional joblessness. We generally see some natural frictional unemployment in a modern economy–as people are in between jobs and take time to find the work that best suits their skills. Hence, in fact, full employment is never 0 percent–due to this frictional unemployment, we can always predict between 2-3 percent unemployment.Temporary short-term unemployment Another potential problem is that there may be fewer job prospects for certain forms of economic growth. For example, without employing a large number of workers, the software industry may be able to add high value added to GDP.

On the other side, labor intensive factories may be closing down, and it is difficult for these unqualified manual workers to migrate into other fields. Recent global economic growth has been worried in sectors with lower job production than average. UK unemployment has dropped much faster in the current economic recovery. Despite weak growth since 2010, UK unemployment has fallen by more than expected by many economists, suggesting more flexibility in labor markets. It also supported quite slow wage growth, prompting companies to hire more workers.