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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 layoffs. 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 alternatives. Conclusion – 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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Box 4 paraphrase
Unemployment- the unemployment rate was relatively low standing at approximately 5% in
2006. As the recession hit in 2008, the rate is seen to rise to 6% and eventually, to 10% at the
peak of the recession period as observed in the middle of 2009. This implies that more people
are without jobs which would be highly expected as businesses downsize their workforce in
times of economic downfall resulting in many layoffs.

Labour force participation- During the peak in 2007, around 66.5% of the entire population
was part of the labour force participation. As the numbers of retirees’ increases, the labour
force participation is falling. In essence, less people are working actively or either
unemployed as they retire which in turn results in this steady decline in the labour force
participation statistic. This decline is expected to continue until all baby-boomers have retired
and been replaced by the next generation populations. It is significant to note that the labour
force participation rate is composed of both unemployed and employed people aged 16 or

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