Why unemployment rate remain HIGH now?


Again, US will announce one of their main economy indicators – unemployment rate – this Friday, 6th August. Investors are cautiously trading ahead of the result, while some economists are projecting a higher unemployment rate this time. What? Higher?


Personally, I think the US unemployment rate will remain high in the short-term, at least, mainly because corporate are upgrading their system, instead of hiring now.

Cost Cutting
For instance, 2008 economic crisis had forced many surviving companies to trim down their workforce, to reduce the fixed cost of a business.

Temporary measure
Then, when economy is getting better in 2009, companies are hiring temporary or contract workers to beef up their inventory which slumped to record low level in previous year.

Improving efficiency
Now in 2010, companies are spending to improve their operating or delivering systems to remain cost competitive. Hiring seems to be the last resort would a company take for long-term confirmation of a reviving economy.

Thus, I’m not surprise if the result remains high at around 9.5% recorded currently.

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