If the US economy was growing at a rate of 2 percent or better in mid-1992,...

If the US economy was growing at a rate of 2 percent or better in mid-1992, how is it possible that unemployment was rising?

Please explain the specifics of the economy in the early to mid-1990s which caused unemployment to grow. Please be concrete, I will rate

Expert Solution

Answer - As per the economists , the rate of growth of the economy should be approximately 3-3.5% in order to decrease the level of unemployment in the economy with the growth of economy. But in this phase this rate was only 2 % indicating the Jobless recovery. This also means that the growth rate of labor force was more than the growth rate of economy while the productivity of the exisitng labor force was low leading to lower growth rate , but rising unemployment. The economy needs to continuosly absorb the new labor force. This will only happen when capability to produce will rise to a good extent which did not happen in this phase. Hence the uemployment rose despite of growth of 2%.

Rahul Sunny answered 2 years ago

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