Question

4. The following table provides information on the civilian non-institutional population (CNIP), the labor force (LF), and the number of unemployed persons for select years between 2006 and 2016. All values are in thousands of people at the end of each year.

Year	CNIP	LF	LFP	# unemployed	UR
2006	230	152.7	66%	7.1	4.6%
2009	236.9	153.1	65%	15.1	9.9%
2018	258.9	163.2	63%	6.3	3.9%

b. The US experienced a severe economic downturn in 2008-09 that resulted in high unemployment. Looking at both unemployment and labor force participation, how do the levels in 2017 compare to those in the pre-recession year of 2006?

CNIP = Civilian non-institutional Population

LF = Labor Force

LFP = Labor Force Participation: labor force/CNIP * 100

UR = Unemployment Rate: # of non-working that looked for jobs in past month/labor force *100

Answer 1

The business cycles are a periodic turn of economic activity including up or downturn. There are four phases of a business cycle: Recession, trough, expansion, and peak. The recession is the downturn in economic activity while the expansion is an upturn. During expansion the economy experience boom. The demand increases, the firms hire new labor to meet the demand, the general income rises in this period. Therefore, during this time the unemployment is low. The expansion ultimately reaches the peak and after that its downturn or recession. Then the pre-recession years are expansion or peak. These years have a high unemployment rate and lower unemployment. Whereas, the post-recession years such as 2017-18 marked an expansion. Expansions have a lower unemployment rate that tends to reach the post-recession peak level. However, as 2009 recession was a great recession with the high unemployment rate and low demand, there were many people who left the labor force or stopped working altogether. These people drove down the unemployment rate down to a level that is lower than 2006 level in 2017-18. Hence, the unemployment and labor force participation rate was lower in 2017 than it was in 2006.