Unemployment – Before the recession, the unemployment rate was rather low in 2006 (approx. 5%),
but as the recession hit in 2008, we see an increase to 6% and eventually, at the peak of the recession,
up to 10% unemployment as seen in the middle of 2009. This indicates that there are more people
without jobs which would be expected as businesses downsize during economic downfall causing many
Labor Force Participation – At the peak in 2007, at around 66.5% of the population was part of the labor
force participation. However, as there are more and more retirees, the labor force participation is
dropping. Less people are actively working or unemployed as they retire causing this statistic to steadily
decline since 2007. We will continue to see this decline until all “baby-boomers” have retired and
replaced with “Gen X” population. It is important to note that the labor force participation rate is made
up of both employed and unemployed persons 16 and older. As a result, the recession does not have a
direct impact on this statistic as it is more based on age/population and ability for people to work.
Average weekly hours of all employees – This statistic mirrors unemployment as seen in the graph. In
2007, total hours worked was at a high of 34.5 hours per week average. In 2008, the hours begin to
decline and in the middle of 2009, it takes a drastic decline to 33.75 hours per week average. Also,
following the decline, in 2010, we see it begin to increase again. We conclude from the graph that jobs
were cut during the 2008 recession. Two things could have happened, less full time workers had jobs to
work during the recession, or full time workers used to working up to 40 hours per week were not able
to work their full amount of hours due to cuts in jobs and work hours not being available (not enough
work for those in the labor force). Employers downsized due to lack of revenue coming in and a
weakening dollar that affected the labor force.
Conclusion: The unemployment rate and total average weekly hours worked data mirror each other. In
2006, there was a low unemployment rate of about 5% and a high average hours worked of 34.5 hours.
As the recession began in 2008, unemployment increased while average hours worked decreased
respectively. Labor force participation rate, on the other hand, has a different pattern in that it peaks at
66% in 2006 and slowly declines through the recession years and thereafter.
Analysis (cycle recession, trough, peak, etc.)
Durable Goods vs. Real GDP –
What features do you observe – Starting in 1999, durable goods were directly correlated with real GDP.
When GDP increased, durable goods did as well and vice versa. This indicates that the durable goods
indicator is a direct reflection of how the economy is doing. When we are in bad economic times, less
durable goods are purchased. We see this exact trend during the 2008 recession when there is a large
dip in the real GDP as well as durable goods. During time of recession, consumer confidence is down,
unemployment is up, and people are not purchasing goods other than necessary goods. When durable
goods are increased, it is a sign of a flourishing economy which is reflected by a high GDP. Durable goods
follow the economic cycle in that when durable goods are up, real GDP is up and vice versa. Durable
goods actually leads to an increased GDP so the two are directly correlated.
Nondurable Goods vs. Real GDP –
The graph implies that nondurable goods, while they follow the trend of real GDP, they do not react as
drastically as the peaks and dips of real GDP. This indicates the need for nondurable goods. Even during
times of recession, people may not spend as much on things such as groceries but they still need to
purchase them to live. Therefore, during time of recession, you will see a decline of nondurable goods
but not as drastically as a decline in real GDP.
Services vs. Real GDP –
This portion of consumption is least affected by economic events that would affect real GDP. While real
GDP takes drastic peaks and falls throughout the life of the graph, services remain fairly steady. This is
due to the fact that services are not necessarily luxury items but are usually necessary for daily living.
Additionally, services can be long term commitments and not as easily abandoned or switched for
Durable goods are most drastically affected by economic changes (most volatile) although it does
drastically drop as the recession hits in 2008. We expect to see this trend as durable goods have the
most alternatives while services are limited and usually more long-term. Essentially all three indicators
make up consumption. It is evident that consumption is going to be affected by how the economy is
doing. If we are in an economic recession, we expect consumption to decline. It will never fully get to
the point of zero consumption as there are basic necessities, but certain indicators are more affected by
economic conditions than others as shown in the graph. These patterns are important for firms because
the indicators show the level of consumer confidence. It tells firms if they should promote growth in
production and labor force versus a time of recession when firms may downsize. Economic conditions
also imply what people will be buying. For example, during times of recession, women tend to purchase
more beauty products (durable goods). To a firm, this is a determinate of what consumers will be
purchasing during certain economic times.
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