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

US GDP growth rate in the fourth quarter of 2019 has been 2.1% and -5% in the first quarter of 2020. It shows that economy is facing contraction and US economy has shrinked in the first quarter of 2020. The recent quarter will also face the similar results as impact of COVID-19 has continued upon the US economy. It shows that US economy is facing the recessionary or contraction phase of the business cycle, as of now.

Unemployment rate has increased in the last two months. It is due to the reason that decrease in AD and AS at the same time, as US economy faced lockdown. It causes recession in the economy and cyclical unemployment increased in the economy. As a result, total unemployment in the US economy increased. It is vindicated by huge number of claims for the unemployment benefits and US government support to people in terms of pay checks to people earning less than $75000 or more than $75000. At present, US unemployment rate is 13.3% of May 2020. It is higher than the unemployment rate of 5%, faced in US economy.

Unemployment situation will improve in the coming two months after COVID-19 pandemic, as production will increase and more jobs will be created so that more people can get employed. So, slowly and progressively, unemployment rate will decrease. It will also supported by the fact that size of labor force will decrease as some of the labor force person will get discouraged and get out of the labor force. It will decrease the unemployment rate.