Question

Question 39 (13.5 points) At the end of 2009, unemployment rate in U.S. was 9.9 percent and labor force participation rate was 63 percent. In mid 2010, unemployment rate was still at 9.9 percent, however, labor force participation rate went up to 65.2 percent. Many economic analysts were saying that U.S. economy is recovering as anticipation for labor market recovery is high. Why the economy is recovering when unemployment rate stays at the same rate at 9.9 percent? Explain succinctly. Format Β Ι Ο A E 38 h 24

Answer 1

Unemployment rate = (no. Of unemployed / labor force)*100

Labor force participation rate = (labor force / working age population)*100

From 2009 to mid 2010, labor force participation rate goes up. It means more labors enter the market. Therefore, labor force increases, so does the no. Of unemployed, assuming that people who enter the labor force don't find job immediately. It means unemployment rate should increase. But given that, unemployment rate remains same, which means more jobs are generated, more unemployed people are getting employed and the number of unemployed decreases. It means, the given statement is True that the labor market and the economy, both are recovering.