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IB Macroeconomics Commentary

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Introduction

IB ECONOMICS COMMENTARY 2 Name: Teacher: Date Written: 28/08/09 Title of Article: Georgia unemployment to hit 11 percent, expert says Source of Article: The Atlanta Journal Constitution Online Date of Article: 26/08/2009 Word Count: 745 Section of Syllabus to which Commentary Relates: Macroeconomics Georgia unemployment to hit 11 percent, expert says by Michael E. Kanell Economic recovery to be slow says Georgia State's Rajeev Dhawan Measured by job growth and investment, economic recovery in Georgia is more than a year away, according to a high-profile local forecast released today. Unemployment will rise to 11 percent next year and the state will shed 43,800 jobs - after hemorrhaging 205,000 jobs this year, predicted the Economic Forecasting Center at Georgia State University. "The recession is clearly abating, [but] the forces that traditionally have firmed up recovery are still missing at the present juncture," wrote Rajeev Dhawan, center director, in the report. The center's quarterly conference is being held this morning at Georgia State. Speakers include experts talking about financial planning and the banking industry, as well as Dhawan's analysis of the economy, the government's efforts to stimulate growth and the "rules of survival for businesses and individuals." ...read more.

Middle

To fuel growth and hiring, the state needs investment, building and consumer buying power - and all are lacking, Dhawan said. "Tech investment growth, a critical predictor of job growth, is still nonexistent, and new construction activity is running at a shadow of its former self." The state of Georgia is on a long road to economic recovery following its decline into recession even "before the national downturn began". Its unemployment rate is constantly rising as the economy suffers from loss of real estate and manufacturing related jobs. Approximately "one of every dozen payroll positions" is estimated to be lost by the time job growth starts again. The individuals who are willing and able to work but are unable to find a job, the unemployed, are eligible for certain state benefits if actively searching for employment. However, economic output in the economy is lower during this time. The longer people are unemployed, the more liable they may be to weaken in skill and, consequently, waste productive potential. The production possibility curve alongside demonstrates Georgia's inefficiency as they are producing at point A rather than at point B. That is to say that they are producing less than the possible output level rather than at the possible output level. ...read more.

Conclusion

The government must create new job opportunities so that residents do not depart in hopes of finding a new job elsewhere and, in turn, cause the state to lose its socioeconomic status. However, for this to be possible, aggregate demand must be high enough to encourage firms to expand their workforce. For the meantime, educational programs would provide individuals with an opportunity to develop their skills and learn new skills. This would increase the value of each worker, and in the long-run, should be a factor in increasing efficiency in the economy again. Nonetheless, the government would be required to fund these programs somehow which may be problematic due to the already existing loss of tax revenue and government spending on unemployment benefits. Another problem is that it may be difficult to decide which fields to train people in as new job opportunities have not yet been created. There will always a possibility that people will be trained in the wrong fields or that they are unable to develop certain skills any more than they already have. The only thing that is for sure is that if the government is unable to provide some way for them to obtaining wages then the state may start to experience higher levels of crime and violence as the unemployed become desperate to find an alternative source of income. ...read more.

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