Employers already are squeezed by tight credit, rising health care costs, wary consumers and a higher minimum wage. Now, the surging jobless rate is imposing another cost. It's forcing higher state taxes on companies to pay for unemployment insurance claims.More unemployment raises unemployment insurance costs for employers, making them less willing to hire, causing more unemployment--a positive-feedback loop or, in the terms popular in macroeconomics, an automatic destabilizer.
Some employers say the extra costs make them less likely to hire. That could be a worrisome sign for the economic recovery, because small businesses create about 60 percent of new jobs. Other employers say they'll cut or freeze pay.
Monday, November 23, 2009
An unemployment feedback loop
From an AP article: