Question

Now graph the unemployment rate (FRED code: UNRATE). Describe how the unemployment rate moves during a recession. What about just after a recession? Is the behavior the same in all the recessions?

Answer 1

Ans) Recesion is basically a slowdown in the economic activities, a business cycle with negative outcomes, a decrease in the demand, shortage of liquidity in the market and so on. As per the various studies including that of, NBER(Arbitrer US recessions) over the stretch of almost 80 years there were 11 recessions. The most recent being in Dec 2007.

Over the years, higher levels of impact have been seen directly on employment, unemployment is the most important indicator of recession. In 2007, the unemployment rate all over the country was 5% and by the time it ended in June 2009, it rose upto 9.5%, and in the following months after it ended by Oct, 2009 the numbers had increased to 10%, and the time when 10% unemployment rate existed during a recession was in 1982 through June 83, where an unemployment rate of 10.8% was seen. Another aspect that it is to be noted, that for several years mens unemployment rate were lower than women's, but a trend can be seen especially from the 1980's where in the mens unemployment rate have been increased when compared to women's.

Apart from the several trends, When we compare the levels of unemployment in relation to the highly industrialized countries, a higher level of unemployment rate was seen than a few other countries, before the recession started. The 2007 recession saw a decline in the employment in manufacturing as well as construction, real estate sector along with the goods producing industries.