Question

Which phase of the business cycle is the U.S. economy in right now? What happened to the U. S. unemployment rate for the last two months? Explain in terms of economics What is your prediction of unemployment situation in the U.S. after the COVID 19 pandemic? Explain in terms of economics.

Answer 1

There are four phases of Business Cycle : Prosperity, Recession, Depression and Recovery.

US economy is passing through a phase of recession. Due to COVID19 pandemic, there has been lockdown for extended period of time. People are not stepping out of the house. All the restaurants, bars, cinema halls, amusement parks have been closed also. There is no airlines operating for domestic and international travels. Most of the hotels are amost running empty. At this stage, most of the residents who are working on daily wages in any of these sectors, do not have any employment for almost 4 months. Due to low level of demand in the market, manufacturing firms also need to bring down the level of production or no production, thus again facing huge losses.

Due to all this many of the people in US, do not have any employment for the last 4 months and are thus unemployed. Unemployment rate has increased for the last two months. It has rose upto 14.7% in April 2020, and now as the economy is opening up slowly, the unemployment rate in May 2020 is 13.3%.

After COVID19 pandemic, economy would open up slowly and thus regained its original state gradually. Although the recovery phase takes its own time to bring the economy back to its original state, till then the unemployment rate would be high. Certain government measures like reducing CRR and Repo Rate would boost the economy and allows new entrepreneurial venture, thus bringing the economy back. Due to the revival of the economy post COVID 19 new entrepreneurial ventures come up which provides employment opportunities. Currently the US economy is in Recession stage and post COVID 19 pandemic comes to the recovery stage. It takes its own time to recover the economy completely.