Question

On April 9, Statistics Canada published Labour Force Statistics for March 2020. Between February and March, 2020, employment fell by 5.3% nationwide. Last year, instead, the change in employment between February and March 2019 was 0%.

Using the model discussed in the lecture notes on chapter 6, discuss the impacts that this change in employment will have on GDP, consumption, national saving, the trade balance and the real exchange rate.

Remember that Canada is a small open economy currently running a small trade deficit.

There is no need to upload graphs in this question, simply discuss the impacts in words.

Answer 1

Dear Student,

Please find below impact of change in employment on GDP, Consumption, National Saving and Trade Balance and real exchange rate

1) GDP

the performance of the U.S. economy in producing additional real output (GDP), new payroll employment opportunities, or any employment for workers (16+) over the past decade was the worst in the past 70 years. Total payroll employment in 2010 was below its level in 2000 for the first time since the Great Depression.

civilian unemployment rate

Between 2009 and 2010, following the Great Recession, the emerging problem of jobless recoveries resulted in record levels of long-term unemployment with over 6 million workers looking for work for more than 6 months as of January 2010. This particularly affected older workers. A year after the recession ended in June 2009, immigrants gained 656,000 jobs in the US, while U.S.-born workers lost more than a million jobs, due in part to an aging country (relatively more white retirees) and demographic shifts. In April 2010, the official unemployment rate was 9.9%, but the government's broader U-6 unemployment rate was 17.1%. Between February 2008 and February 2010, the number of people working part-time for economic reasons (i.e., would prefer to work full-time) increased by 4 million to 8.8 million, an 83% increase in part-time workers during the two-year period

As of December 2017, the unemployment rate in the U.S. was 4.1% or 6.6 million people. The government's broader U-6 unemployment rate, which includes the part-time underemployed, was 8.1% or 8.2 million people. These figures were calculated with a civilian labor force of approximately 160.6 million people, relative to a U.S. population of approximately 327 million people

Income inequality

Income inequality has become a hotly debated topic globally. According to the CIA World Factbook, U.S. income inequality ranked 41st highest among 156 countries in 2017 (i.e., 74% of countries have a more equal income distribution)

Interest Rates

In year 2000 interest rate in USA was 6.24%

United States has lowered its interest rates by 1 percentage points, from 1% to an annual rate of 0%. The key rates a tool used by Central Banks to implement monetary policy.
United States has lowered its interest rates.

ype	1980	1985	1990	1995	2000	2001	2002
Federal funds, effective rate	13.35%	8.10%	8.10%	5.83%	6.24%	3.88%	1.67%

Inflamation Rate

The annual inflation rate for the United States is 1.5% for the 12 months ended March 2020 as compared to 2.3% previously, according to U.S. Labor Department data published on April 10, 2020.

foreign Trade

The United States is the world's second-largest trading nation.There is a large amount of U.S. dollars in circulation all around the planet; about 60% of funds used in international trade are U.S. dollars. The dollar is also used as the standard unit of currency in international markets for commodities such as gold and petroleum

The North American Free Trade Agreement, or NAFTA, created one of the largest trade blocs in the world in 1994

Since 1976, the U.S. has sustained merchandise trade deficits with other nations, and since 1982, current account deficits. The nation's long-standing surplus in its trade in services was maintained, however, and reached a record US$231 billion in 2013

Trade Balance

Fiscal Policy considered any changes the government makes to the national budget in order to influence a nation's economy. The approach to economic policy in the United States was rather laissez-faire until the Great Depression. The government tried to stay away from economic matters as much as possible and hoped that a balanced budget would be maintained. Prior to the Great Depression, the economy did have economic downturns and some were quite severe. However, the economy tended to self-correct so the laissez faire approach to the economy tended to work.

Consumption

Employment may remain unchanged or may even increase, as consumers spend more of their money on goods and services where prices are less affected by minimum wages. ... Employment may expand in other firms and higher wages may attract more people into the labour market

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