The US unemployment rate stood at 4.3% in July against 4.4% in the month before. The number of unemployed stood at 6.981 million – an increase of 4,000 from June. A relatively low unemployment rate is considered by most experts as an important factor for economic growth.
This way of thinking based on the view that a reduction in the number of unemployed means that more people can now afford to boost their expenditure. As a result, economic activity follows suit. If unemployment is an important driving force of an economy then it is valid to conclude that changes in unemployment are an important causative factor of real economic growth.
In truth, the main driver of economic growth is an expanding pool of real savings rather than the state of unemployment. Fixing unemployment without addressing the issue of real savings cannot lift the pace of economic growth as such.
According to Mises,
“The sine qua non of any lengthening of the process of production adopted is saving, i.e., an excess of current production over current consumption. Saving is the first step on the way toward improvement of material well-being and toward every further progress on this way.”1