Question

Labour Market Variables: Consider the following US labour market variables from before, during and after the Great Recession. These numbers are not exact but tell a rough story of what actually happened and are meant to encourage you to think deeply when interpreting labour market indicators.

• Pre-Great Recession: Unemployment Rate = 4.5%. Labour Force = 150. Median Weekly Real Earnings Wage: $340

• Mid-Great Recession: Unemployment Rate = 9.6%. Labour Force = 150. Median Weekly Real Earnings Wage: $350

• Post-Great Recession: Unemployment Rate = 5.0%. Labour Force =140. Median Weekly Real Earnings Wage: $330

Where the labour force is measured in millions of persons. The working age population is assumed to be constant at 200 million persons. The median earnings are measured in constant dollars and are comparable across time periods. Evaluate the following statements about the labour market:

• Mid-Great Recession: “Despite high unemployment we are encouraged by signs of median real wage growth.”

• Post-Great Recession: “The labour market has recovered because unemployment is almost at its pre-recession level.”

Answer 1

	Labor force	Unemployment rate	Employed persons	Wage per worker
Pre recession	150	4.5%	143	340/143=2.37 dollars
Mid recession	150	9.6%	135	350/135=2.59
Post recession	140	5%	143	330/143=2.30

The first statement is fairly True since mid recession saw fullblown effects and unemployment rose exponentially to all time high however an increase of wages from 340dollars to 350 dollars was seen.

However the second statement is untrue because the post recession saw settling down of dust as unemployment restired to pre recession level however wages decreased and so did labor force participation anf consequently wage per worker also decreased showing no big signs of improvement of labor market.