Unemployment in the UK and US
Extract 1: Falling unemployment (the Guardian, 2000)
The claimant count in the UK has fallen steadily – it is now 3.6 percent. An alternativemeasure, the labour force survey, however indicated that unemployment rate is 5.3 percent.

But is some parts of the country are enjoying full employment, there are pockets left
untouched by growth. Cities that were thriving on heavy industries such as Liverpool and Glasgow, inner city districts such as Tower Hamlets, parts of the Scottish highlands as well as resorts such as Brighton are pockets of employment black spots.

Age and racial discrimination contribute to the difficulty for some to find jobs. Whiteapplicants are three times more likely to get an interview than people from Asian backgrounds with equivalent qualifications and five times more likely than black people.

Extract 2: Boom, boom…bust: a tale of two economies (the Economist, 2002)
In 2001, for the first time in eight years, the annual change in real GDP of the US
economy was negative. As the domestic economy experienced a downturn, the number of
people out of work has increased. The Federal Reserve reacted to the decline in economic activity by cutting its interest rate to just 2 percent in October 2001, the lowest in forty years. The Monetary Policy Committee of the Bank of England responded by reducing its interest rate to 4 percent although the UK economy was relatively strong compared to that of the US.

Extract 3: No change in US rates (Today, 2004)
Policy-makers sounded more cautious about the prospects for a strong job growth – so far a missing ingredient in the recovery from the recession.

Federal Reserve chairman Alan Greenspan said last week that job picture should brighten “before long as output continues to expand”. One factor presently holding hiring down is a huge growth in labour productivity, but those gains will wane indefinitely and force companies to take on more employees.

Extract 4: Protecting jobs will backfire (Today, 2004)
Alan Greenspan warned that “erecting walls” in a bid to curb job losses would backfire on the US.

Although he firmly believed that employment would begin to increase more quickly
before long as output continued to expand and that new jobs would replace old jobs, he also cautioned that the job turnover process would never be without pain.

He acknowledged the rising concerns “about the possibility that an increasing number of our better-paying white-collar jobs will be lost to outsourcing”. He said, “We can erect walls to foreign trade and even discourage job-displacing innovation. The pace of competition would surely slow and tensions might appear to ease. But only for a short while.” Efforts to protect US jobs through legislation could end up backfiring, he added.



Questions
1. With reference to data, describe how macroeconomic performance of the US and
UK had changed since mid 1990s to the early 2004. [4 marks]

2. Explain what is meant by labour productivity [1 mark]

3. With reference to extract 3, analyse the short and long term impacts of labour
productivity improvement on unemployment in the US [3 marks]

4. Analyse the causes of unemployment in the US and UK between 1996 and 2004
[6 marks]

5. Based on the data, do you agree the US is adopting the best policies to combat
unemployment? [8 marks]

6. How far does table 1 show that standards of living has improved in the US and
UK in the later half of the 1990s? [8 marks]

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Note: I will email the file to edmund and yi hui to send around.