Economics trade IA Essay
BBC News: UK unemployment rises to 2. 56 million (17/4/13) UK unemployment rose by 70,000 to 2. 56 million between December and February, the Office for National Statistics (ONES) has said. It pushed the unemployment rate to 7. 9%, raising further questions about the Auk’s economic strength. The number of people in employment also fell, while earnings growth slowed considerably, according to ONES data. But there was positive news on the number claiming Jobholder’s Allowance last month, down 7,000 to 1. 53 million. ‘Challenges ahead’
The number of people in work fell by 2,000 in the latest quarter to February, to Just under 30 million, the first time the figure has dipped since autumn 2011. And the ONES said that average regular pay, excluding bonuses, rose by 1%, the lowest since records began more than a decade ago. The news hit sterling, with the pound falling more than a cent against the dollar on concerns that a weaker labor market pointed to worsening economic prospects. It was up against the Euro as the equity markets in London closed, having reversed earlier losses.
Employment Minister Mark Hobby acknowledged that there were “still tough challenges ahead”, but highlighted the importance of the fall in
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However, the ONES data also revealed that 900,000 people have been out of work for more than a year, an 8,000 increase on the three months to November, while the number of unemployed 16 to 24-year-olds rose by 20,000 to 979,000. Despite the increase in unemployment, the total is 71,000 lower than a year ago. There has been a 62,000 fall in the number of people in part-time Jobs, to Just over eight million, with a 60,000 increase in full-time employment, to 21. 6 million. Economics trade IA By chukka International Monetary Fund that the UK ease its austerity plans.
Lima Byrne PM, Laborer’s shadow work and pensions secretary, said: “Three years on it’s now as clear the government’s plan is failing, and failing badly. Not only are more people unemployed than at the election, it’s soaring up. “With the MIFF warning George Osborne to change course and unemployment getting worse, it’s clear the time has come for a fresh approach. ” ‘Needless waste’ Alan Clarke, economist at Citibank, said: “It’s not a disaster, but a lot of the froth and really good news we had over the last year on Jobs is becoming exhausted, which shouldn’t be a surprise when there is not much growth around.
George Buckley, at Deutsche Bank, said the data told two stories about the Jobs market. “On the claims numbers they were obviously quite positive in the sense that the last month’s number got revised to an even bigger fall and we saw another fall this month. “But on the negative side, first of all employment, which is down, the expectation was that it would rise slightly, we saw the unemployment rate go up and we’ve also seen very weak average earnings growth, much weaker than expected,” he said.
GM union general secretary Paul Kenny said: “The chancellor should heed MIFF device to change course to grow the economy to end this needless waste of human talent. ” The Prince’s Trust highlighted the particular impact of youth unemployment, which chief executive Martina Million said “is still dangerously close to a million”. She said: “Thousands of these young people are long-term unemployed, often facing further challenges such as poverty and homelessness. We must act now to support these young people into work and give them the chance of a better future. Also on Wednesday, the Bank of England released minutes of its last interest rate eating, which showed that policymakers remain divided over whether the I-J economy needs more stimulus via its quantitative easing asset purchase programmer. Economists believe it is a close call whether first quarter growth data, due to be published next week, will show the economy sliding back into recession. They said the fragile labor market underlined the continuing weakness of economy, and there was particular concern about the ONES’ pay data. That pushed the Euro to 86. 7 pence against the pound, its highest since 15 March. Sterling also fell 0. % against the dollar. “It’s the earnings data that has done the damage. Combined with ICP (inflation) data yesterday it shows the brutal squeeze on real incomes is ongoing,” said Adam Cole, global head of FAX strategy at ROB Capital Markets. The article suggests an unemployment increase in UK that rose from 70,000 to 2. 56 million within December 2012 and February 2013. The UK government has introduced austerity plan since 2011 to decrease government spending and increase tax.
The trend shows an ageing population in the labor market- higher proportion of adults working than the younger people in the society, where more young people are jobless that contributes to the weak labor market, which leads to the weakening of currency but increasing inflation. Austerity plans are policies used by the government to cut budget deficit. In general, launching the austerity plans leads to increasing unemployment because less government spending will help less on generating the economy.
As shown on the diagram on the right, when government tries to increase tax, cost-push inflation may set in, shifting short run aggregate supply to the left, increasing the price from Pl to UP. As price increases, demand decreases, therefore the economy is not generated properly, unemployment then increases. One of government’s objectives is to decrease unemployment, which corrects market failure- misapplication of resources. In order to improve the unemployment rate, the government may attempt to increase the aggregate demand (I. E. Total demand), for labor in the market, which shifts the AD curve to the right. If more labor is demanded, the unemployment rate will allow fall, as more people get a Job. The AD curve can be shifted by government policies, for example, government providing besides for infant industries, which are newly set up firms to decrease their costs, so the unemployment rate could be improved. There are two distinct economics views on reviewing the unemployment: New classical and Keynesian. In the New Classical economics point of view, the market is self-corrected, I. . Without government intervention. In this case, the economy is producing at full capacity, the output of the economy is based on the quantity and quality of the factors of production, which is independent of the price level. As the government intervenes, ii. Tax increases, labor cost increases from Pl to UP, the cost is then placed above the equilibrium, where the aggregate supply is greater than the aggregate demand of labor, the unemployment x-y is formed. On the other hand, the Keynesian economists have another point of view on the causes of unemployment.
The main difference of the Keynesian view is that the economy does not need to be running under full capacity, so it is natural for unemployment to exist, as there should be spare capacity left if the economy is not running at WFM. As the austerity plan is introduced, consumer’s aggregate demand loud decrease due to the inflation caused by increased tax. The demand for labor may led to a fall, as firms need to keep its production cost at the lowest. Might cut their own spending, due to the inflation caused by increased taxation.
Spend cut both benefits and harms the economy as a whole. Decreasing a country’s spending may aid the reduction of debt, the country do not need to spend as much and therefore may borrow less from other countries, so they would have lower debt. The country with lower debt means the government will reserve more resources for its own citizens. The public welfare then increases. Moreover, since spending is one of the most significant ways to stimulate the economy, individuals refuse to spend may worsen unemployment.
Spending usually helps generate the economy. Without spending, or in other words, demand for products decreases, goods in the market may deflate due to the new demand curve cutting into a lower price value position of the supply curve. In worst cases, firms may then try to retain its income by redundancies (cyclical unemployment), leading to higher unemployment rate, which worsens the nation’s purchasing power. As shown n the left, the demand curve shifts to the left when it decreases, the price then moves from Pl to UP, leading to deflation.
However, although the austerity plans may affect individual spending, this may not fully affect the British economy. As mentioned in the article, the Sterling dropped by 0. 6% against dollar. The weakening of the exchange rate may favor the exports, as foreigners purchase at a lower price. This may help to balance out the low spending in the UK and helps to generate the economy, which suggests why the unemployment rate did not increase as greatly, but instead with more full-time unemployment.