Question

Wisconsin Unemployment Rate 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1980 1984 1988 1992 1996 2000 2004 2008

1- Highlight two periods which show significant changes of the unemployment rate, and discuss the underlying reasons for the changes.

2 - discuss what we can learn from the unemployment data.

Answer 1

1.

It is the period of 1983 and 1984 and afterwards for the new 2 -3 years and the period of 2009 when there are the biggest shift and signigicant change in unemployment rate is observed.

For the first period in 1983 and afterwards, there is a significant decrease in unemployment rate, because of the economy of USA and in particular of Wisconsin recovered from the recession that was considered as hardest after the second world war. So, a higher unemployment rate before than period showed significant change with the jobs coming out from agricultural sector such as dairy industry and services industry such as IT and tourism in the Wisconsin region.

The second period was the period after 2008 financial crisis that swept whole USA. It created loss of jobs in the Wisconsin region as well as unemployment rate soared significantly in 2009.

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2.

Unemployment data tells the state of the economy in general. A lower unemployment rate shows that economy is growing, new jobs are being created and real output is rising in the economy. Further, a lower unemployment rate also indicates people spending more and inflation rate is rising. In a reverse case, a higher unemployment rate shows contractionary GDP, poor demand and lower price level in general. Though, stagflation is exception when higher unemployment rate is combined with higher inflation rate.

Besides, the unemployment rate also shows the labor force participation rate. A more optimistic economic outlook, can make people join the labor force, increasing the labor force participation rate. But, the economy may not produce the jobs in the same rate. So, the unemployment rate increases initially even if economic prospect is good.