Analyze the labor market before, during, and after the financial crisis

Anonymous
timer Asked: Apr 24th, 2017

Question description

I have an assignment and the answer but I need someone does paraphrasing for the answer

The assignment is:

For this assignment, you will analyze the labor market before, during, and after the financial crisis.

You will analyze the 2006‐2016 period; these are the years that have the same unemployment rates at both end‐points (4.7% in both January 2006 and December 2016)

‐ Go to BLS.gov and look for:

1) the Unemployment Rate;

2) Labor Force Participation Rate, and

3) hours of work

(search: total private average weekly hours of all employees).


The purpose of this box is to document and explain these three indicators during the Great Recession.

The participation rate and hours correspond to the extensive and intensive margins, respectively. The“extensive margin” refers to whether to work or not, and the “intensive margin” refers to how many hours ‐‐‐once one has decided to work.



2008, the financial sector crashes, and the economy -on which its weight was over 20%- falls with it. This period has been named by the economists -those who were able to explain the catastrophe only after it happened- as the Great Recession. The indicator which defines a given economic period as a recession (or as an expansion), is the negative growth in real GDP during two consecutive quarters. On the other hand, the indicator which really defines how recessions affect households income (and therefore wealth) is the unemployment rate. Because of those two indicators, economy is said to be recovered, as GDP growth is back to normal rates -those in 2006, and so it is the unemployment rate. What is the unemployment rate, and how is it calculated? In this analysis, we take the unemployment rate as an approach to figure how the Great Recession effects impacted and still impacts economy, and most importantly, households. It is defined as the percentage of population in the labor force who can’t find a job. It is calculated as follows: * Labor force -population eligible for work, who are working or actively seeking for a job. * Employed population -people who has a job. Nevertheless, considering the unemployment itself as a sole indicator to evaluate the labor market’s health may lead to misunderstanding. There are two other indicators which definitely help having a better picture of it. As the unemployment rate is calculated based on the labor force, and the labor force is defined by the population who is actively working or seeking for a job, we should take into consideration the population who simply does not want to work (or… does not want or cannot work legally). This fact is captured by the labor force participation rate, which is defined as -the proportion of the population who is actively participating in the labor force. Healthy economies tend to have higher labor force participation rates as their labor market are more attractive for population. People may be employed, but in which conditions? Another important indicator to take into consideration when analyzing a country’s labor market is the average weekly hours of all employees. This indicator is as important as average wages when determining the quality of the labor market, because it takes into consideration the proportion of employed people who works part-time (nondesirable situation). How the Great Recession affected the U.S. labour market. Because of ‘Great’, all labour market indicators have been affected by the 2007/08 economic crisis. Because of ‘Recession’ the impact has been dramatically negative. In this before and after Great Recession approach analysis, we analyze how negatively this period has impacted the three major labor market indicators. Before the Great Recession, indicators regarding employment in the U.S. were close to optimal levels. With the unemployment rate rounding 4 percent (almost full employment) and labor market participation reaching one of highest levels in history, only the overall labor market was considered to be in good shape. This fairy tale turned into a nightmare suddenly during 2008 and 2009. The unemployment rate skyrocketed to 10% by the end of 2009 -considering that the labor force participation rate also fell by 1% during the same period of time, the real effects of the Great Recession were dramatical for the american labor market. Taking a deeper look on the three indicators considered in this analysis, the situation looks even more terrifying. An unemployment rate of about 10% in the U.S. economy (the most liberalized economy on earth) has dramatical consequences for population, as households are not so protected by government as in other countries. Although many economists, discussed whether this percentage was completely accurate -the argument is that during such a negative economic period, unemerged economy tends to grow-, there is no doubt that many households went bankrupt and had to change their lifestyle for a much more humble one after 7.9 million people lost their jobs. Those lucky enough to have a job, also were affected during this period. Consequence of the tough competition among unemployed population for finding a job, wages decreased sharply, and also did the average weekly hours of all employees. This phenomenon is called distribution of work, and tends to happen during recession periods. For a better picture of the overall U.S. labor market attractiveness during the Great Recession, it is necessary to observe the declining on the labor force participation rate. In the scenario we are analyzing, the market became so negative that many people abandoned the search of official jobs, and most likely- switched to the unemerged economy as a way to survive to the situation going on during this period. Few months ago, we have reached unemployment rate levels similars to the ones prior the recession (4.4% in December 2016). Nevertheless, we should still remain cautious when claiming that economy has fully recovered -consider that unemployment rate is nothing else but the portion of people who is willing to work, but cannot find a job. Being true that there is less people who cannot find a job than during the Great Recession, there are also less people who are willing to work -or at least to work legally-, what helps unemployment rate remain on low levels. Anyway, U.S. economy seems to be showing strong numbers YoY and recovery seems to keep on track, but is still being too early to understand the economy in terms of employment as it was a decade ago.

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