Introduction
The US economy has been recovering slowly and it has shown improvement over the past three years. We must remember that the country went through a major recession about six years ago and the government continues making efforts to combat the recession and stimulate the economy. As of 2015 it is visible the economy is growing because there is more availability of jobs compared to previous years. Unemployment rates have decreased every single year for the past five years. Energy and gas prices have fallen and it is positive for consumers because is putting more money into their pockets therefore individuals will have more disposable income. According to CNBC (2015) it seems lower gas prices has helped consumption levels increase and improved GDP growth of a 3% annual rate.
Unemployment & Inflation
It is important to understand the relationship that exists between unemployment and inflation. A natural rate of unemployment is considered between 4% and 5% and anything below is considered below the natural rate. It will be accurate to say unemployment below natural rate causes wages to increase because there are more jobs available than people and employers are force to increase wages to keep or attract employees. In a tight market employees have options to find other jobs that pay more. Also, the unemployment rate below the natural rate will cause inflation because for employers to be able to increase wages need to increase production and this mean their cost go up, so prices go up as well.
In today’s economy unemployment rates has been declining slowly but at steady paste. In the past five years it is visible the unemployment rate has decreased as shown on table provided by State Bureau. Year 2009 shows a high rate of 9.9 and as of 2014 a 5.6 and although unemployment rate has increased by a fraction in January 2015 to a 5.7 still it is lower than