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Unemployment is considered to be a lagging indicator, but even so it would seem that the unemployment rate should be dropping faster than it is, now that economic recovery is underway. The current unemployment rate in the United States is 7.3%, up from 7.2% the month previous but otherwise at the lowest level since late 2008. This level is much higher than the pre-recession norm of 5% or lower
Whether unemployment is lagging too much or not is a question that cannot be answered without a benchmark. We know that the stock market is a proxy for economic activity, but as a leading indicator it is quite removed from the unemployment rate. Furthermore, many U.S. companies do a lot of business internationally. The success of Starbucks in China will move the stock but has nothing to do with U.S. unemployment. So GDP tends to be one of the best benchmarks for unemployment.
The recession that created the spike in unemployment also reduced U.S. GDP and when GDP growth came back, it was at a lower rate than before. Thus, the actual GDP was well below potential GDP. The way the job market works is that every year, new graduates and new immigrants enter...
So the supply of new labor into the workforce is predictable, and in most years it is growing. If the economy is in a state of equilibrium, this number of new workers should roughly match the combination of retiring workers and new positions created. In that equilibrium state, the unemployment rate will fluctuate a little bit, but stay within a range. While the number of immigrants is controlled by government, the number of graduates is not. So for the last several years the baby boom echo generation has been entering the workforce but their parents, the boomers, have not been exiting en mass yet. The first boomers are only now turning 65 so retirement thus far has been early for the boomers. As such, the number of workers in the workforce should have been increasing. If the economy is growing rapidly, as it was in the mid-2000s, it should absorb these additional workers. When the economy slows, it cannot absorb them and the unemployment rate spikes.
The problem with our recovery is that in GDP terms, it has been soft. The Cleveland Fed illustrates the gap…
Linda Levine, "Economic Growth and the Unemployment Rate," Congressional Research Service, January 7, 2013, accessed December 3, 2013, ?
http://www.fas.org/sgp/crs/misc/R42063.pdf
BEA, "National Income and Product Accounts," Bureau of Economic Analysis, November 7, 2013, accessed, ? http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm "newTurabian" ?http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm?.
Enter the Fed, Yet Again Unable to understand that rapid interest rate moves create shocks to the market, resulting in distortions in supply and demand, the Fed dealt with the bursting of the housing bubble by lowering interest rates rapidly, this time to next to nothing. This response was intended to stimulate the economy. In 2001, the rate decreases were also intended to stimulate the economy, but they mainly stimulated one
Business Cycles: Phases, Indicators, Measures, Economic Evolution, Outlooks is currently recovering from its worst recession in over 25 years. Most economists consider the rapid rise in housing prices (the bubble) and the subsequent collapse in that market to be the primary cause of the recession. Explain what housing market circumstances were responsible for the collapse of that market. Observers attribute the 2001-2006 housing bubble to "everyone from home buyers to Wall Street,
Business Economics The Limitations of the National Income Accounts in How They Represent Our Standard of Living The national income accounts have been the center piece in all matters concerning economics across the globe. These rules are a primary source of reference in determining the economic status of a given nation. It is the most preferred indicator of the rate of improvement and making comparison across nations. However, it is not
Starbucks Economic indicators inform companies about the broader trends in the economy. Most companies are well aware of their own internal performance, but economic indicators can provide additional information. For example, if the economy is slumping, then a slight downturn in a company's revenues might be expected. If the economy is booming, however, then that same downturn would be a red flag. So economic indicators can sometimes serve as a benchmark
Increases in manufacturing reveal benefits early, one can track the benefit at all stages and report the benefits to the public quickly. According to a statement released by the Center for American Progress, "solar panels don't install themselves. Wind turbines don't manufacture themselves. Homes and buildings don't retrofit or weatherize themselves. In our industrial society, trees don't even PLANT themselves, anymore. Real people must do all of that work."
Target's chart, however, shows that the company has tracked the market and GDP fairly closely, indicating that perhaps it does not trade the way a discount retailer should. Johnson & Johnson JNJ is a pharmaceutical and consumer products company. It competes in pharmaceuticals, consumer products in the health and beauty segment and in medical devices. The company was founded in 1886 and today is a multinational conglomerate with operations in 57