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Why Is a Low Unemployment Rate Good?

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A low unemployment rate means the number of Americans actively seeking work is low relative to the population of active workers. A low rate has several important advantages for society at large, as well as for individual workers and business owners.

Optimal Levels of Production

Low unemployment improves efficient use of equipment and resources, which is beneficial to companies and the overall economy. When businesses operate with full staffs, they generate an optimal level of products each day. This production efficiency means the company is able to meet customer demand and maintain good relationships with suppliers and buyers. From a macroeconomic perspective, the U.S. gross domestic product grows only when producers and resellers use available resources and keep products moving through the distribution process.

Easier Job Access

It is easier for the typical worker to find a job when unemployment is low. Low unemployment signals that companies have confidence in marketplace demand in the near future. Therefore, they hire workers to expand operations. Low unemployment means the proportion of jobs available is relatively high compared to the number of workers competing for those positions. Because fewer people are looking for work, employers have to offer higher wages to entice people to work for them, meaning incomes go up.

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High Consumer Buying Power

Consumer spending impacts the majority of economic growth in the United States. When people have money to spend, they support the businesses that then hire employees. During a strong economic cycle, low unemployment essentially feeds itself. Businesses do well because Americans have money to spend. Major sectors of the economy, including housing, banking and retail, are stronger and more stable during periods of low unemployment because people have income to pay the bills.

Less Government Borrowing

Low unemployment reduces the strain on the government, and taxpayers, to support a large population of people out of work. With more people working, the government has less burden to put money into welfare assistance programs. Also, more people working allows the government to bring in more tax revenue. Higher revenue and reduced payouts creates a more fiscally responsible operation. The government does not have to rely as much on borrowing to keep up with bills, saving on interest payments.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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