How much larger was the peak of initial unemployment claims during the COVID crisis relative to the previous peak in claims
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Instructions:
Please create one word or pdf document with all your answers in sequential order. If the
question involves downloading data and creating a chart, embed the chart in the document,
and upload your spreadsheet separately. The idea is that this reads like a report, with the
calculations work relegated to the spreadsheet submission.
1. Provide definitions for the following terms: i) Labor force participation rate, ii) Unemployed, iii) Marginally attached worker, iv) Discouraged worker.
2. From FRED, download the annual unemployment rate series for the U.S., along with recession indicator, and create time series plot of the unemployment rate–with recession
shading–for the period 2000-latest available.
3. Go to OECD.stat. It contains the share of marginally attached workers in the labor force (I’ve done the search part for you here). For the U.S. only, download the data
and create the following separate charts for the period 2000-latest available:
• Men (age 15-24) , and Men (all ages–labeled as Total). Include recession shading.
• Men (all ages), and Women (all ages). Include recession shading.
4. Download the weekly initial unemployment claims seasonally-adjusted series from FRED, as well as the recession shading series. Create a plot with this series and
recession shading, from 2000 to the most recent figure published last week.
5. Read the following articles. You will use what you learned from these readings and your data work to answer questions at the end, so you may want to read the questions
first so that you can take notes while reading the articles:
• “Labor Force Participation and the Future Path of Unemployment” – https://www.frbsf.org/economic-research/files/el2010-27.pdf
• “The Declining Labor Force Participation Rate: Causes, Consequences, and the Path Forward” – https://equitablegrowth.org/declining-labor-force-participation-rate-causes-consequences-path-forward/
• “The Divergent Signals about Labor Market Slack” – https://www.frbsf.org/economic-research/files/el2021-15.pdf
6. Based on your data work, your readings,write a short essay (2-3 pages) addressing the following questions.
• How much larger was the peak of initial unemployment claims during the COVID
crisis relative to the previous peak in claims (during the Great Recession)?
• Why is it important to keep track of both unemployment and labor force participation to get a full picture of the labor market?
• What has been happening to labor force participation over time in the US? How does it differ across age groups? How does it differ by gender?
• What are some of the policy challenges and recommendations to increase labor force participation?
• What can we learn from indicators of labor market slack? How have these indicators diverged from their historical tendency during the COVID-19 pandemic?
Please Insert the graph images of OECD and FRED recession bar chart
SAMPLE ANSWER
According to the data from the U.S. Department of Labor, the peak of initial unemployment claims during the COVID crisis was significantly larger than the previous peak during the Great Recession. During the Great Recession, the highest number of initial claims in a single week was 665,000 in March 2009. In contrast, during the COVID crisis, the highest number of initial claims in a single week was 6.6 million in March 2020. This is roughly ten times larger than the previous peak during the Great Recession (U.S. Department of Labor, n.d.).
Both unemployment and labor force participation are important indicators of the labor market. Unemployment measures the percentage of people who are actively looking for work but are unable to find it. Labor force participation, on the other hand, measures the percentage of people who are either employed or actively looking for work. It is important to keep track of both indicators to get a full picture of the labor market because they provide different perspectives on the same issue. For example, a decrease in the unemployment rate may be seen as a positive sign, but it could also be due to a decrease in labor force participation. In this case, the decrease in unemployment may not reflect an actual improvement in the labor market (U.S. Bureau of Labor Statistics, n.d.).
The labor force participation rate in the US has been declining over time. In 2000, the labor force participation rate was 67.1%, but it had decreased to 62.6% by 2016 (U.S. Bureau of Labor Statistics, 2017). The decline has been more pronounced among certain age groups and genders. For example, the labor force participation rate among men aged 25-54 has been declining since the 1950s (Autor, 2015). Among women, the labor force participation rate increased from the 1950s until the 1990s, but it has been declining since then, particularly among women aged 25-54 (Mishel, Bivens, Gould, & Shierholz, 2015).
One of the policy challenges to increase labor force participation is addressing the factors that discourage people from entering or staying in the labor force. Some of these factors include a lack of affordable childcare, insufficient access to education and training, and inadequate support for caregivers (Council of Economic Advisers, 2016). To address these challenges, some recommendations include increasing access to affordable childcare, expanding access to education and training, and providing paid leave for caregivers (Council of Economic Advisers, 2016).
Indicators of labor market slack, such as the U6 unemployment rate, the share of workers who are working part-time for economic reasons, and the labor force participation rate, can provide insights into the state of the labor market. During the COVID-19 pandemic, these indicators have diverged from their historical tendency in several ways. For example, the labor force participation rate decreased sharply during the pandemic, but it has been slow to recover (U.S. Bureau of Labor Statistics, 2021). The U6 unemployment rate, which includes both unemployed and underemployed workers, increased rapidly during the pandemic but has also been slow to recover (U.S. Bureau of Labor Statistics, 2021).
References:
Autor, D. (2015). Why are there still so many jobs? The history and future of workplace automation. Journal of Economic Perspectives, 29(3), 3-30.
Council of Economic Advisers. (2016). Supporting working families: A comprehensive agenda for America’s workers. Retrieved from https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160913_cea_workforce_report.pdf
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