Question

Here is the unemployment summary from February, 2020 (pre-COVID19)

Data from February 2020:

Unemployed: 5.7 million

Employed: 158.8 million

Not in the Labor Force: 95.1 million

Unemployment rate: 3.5%

Labor force participation rate: 63.4%

Here is the unemployment summary from April, 2020

Data from April, 2020

Unemployed: 23.08 million

Employed: 133.4 million

Not in the Labor Force: 103.4 million

Unemployment rate: 14.7%

Labor force participation rate: 60.2%

1. Describe what happened between February and April using the unemployment and labor force participation rates. You must JUSTIFY these changes using rationale from this chapter. You must consider how we calculate unemployment and the labor force participation rate (look at the numbers that go into the calculations and not just the percentages).

Answer 1

Answer - The month of feb was a pre covid time where the economic activities were smoothly going on in the economy. Hence the level of unemployment will be lower and level of employment will be higher. The participation of the labor force will be higher. But , during the covid period , means in the month of April , the economy was shut down in order to prevent the infection from spreading. There were government order for the lockdown and hence all the economic activities had to be stopped. This led to the large amount of population to sit at home , they were laid off due to lockdown and were eager to work but they couldnt because of lovkdown. This lead to the rise in the umemployment rate from 3.5 to 14.7 %. This is a huge rise and the recession which came in form of lockdown is the responsible factor here . This rate is calculated as a percentage of labor force. The labor force participation rate decreased , but this was less than increase in unemployment. Also , the fall in LFPR means that people also became discouraged and stopped looking for job , or it may be the case that some of them retired during this 3 month phase.