Question

1. The following table represents unemployment compensation claims US starting from May 07, 2020.  Further, a record 20.5 million American jobs lost in April 2020. Unemployment rate increased to 14.7%.

7-Mar	14-Mar	21-Mar	28-Mar	4-Apr	11-Apr	18-Apr	25-Apr	2-May
0.211	0.282	3.307	6.867	6.615	5.237	4.442	3.839	3.169

1. Discuss the above numbers in terms of cyclical, frictional, and structural unemployment (10 points)
2. What does it mean to the US economy in the short run and long run? (10 points)

Answer 1

Unemployment compensation claims US starting from May 07, 2020. Further, a record 20.5 million American jobs lost in April 2020. Unemployment rate increased to 14.7%.

a) There is a slight increase in unemployment (0.071) between 7th March to 14th March may be due to frictional unemployment that shows the movement of people from one job to another. But if we see between the period of 28th March to 4th April and 25th April to 2nd May, there is a slight decline (0.252 and 0.67 respectively) in unemployment rate. This unemployment was reduced as the worker got more information about jobs. From 14th March onwards, unemployment starts declining faster up-to 28th March. It was due to cyclical unemployment as the economy was slow down, the demand for worker decreases. As the economy recovers this unemployment keeps on declining as shown till 2nd May.

B) In short run, the unemployment is generated due to cyclical unemployment. But it remains same for long period of time (as mentioned 14.7%), it shows that now economy is not able to absorb unemployed workers and thus this unemployment requires change in structure.