Table 3 Lifecycle of the Expansion
6/20
12
10
9/20
8
3/21
6
3/20
4
2
0
38.5
39
39.5
40
40.5
41
Average Weekly Hours
Description: • Table 3 plots the unemployment rate against average weekly hours in manufacturing on a quarterly basis since December 2019. • There are four phases: 1. In the initial phase of an expansion, unemployment is stable and remains high while there is a sharp rise in hours per week 2. In the second phase, the unemployment rate falls while hours per week tend to be relatively stable. • This graph visually demonstrates the enormous (but hopefully, temporary) impact of the pandemic on the economy which differs greatly from a “normal” business cycle. Fed Chair Jerome Powell compared the pandemic to a “natural disaster” that hit the economy. • For 2020 Q2 (6/20), we see the dramatic impact of the pandemic with unemployment skyrocketing and average weekly hours dropping. For 2020 Q3 (9/20), we witnessed a sharp rebound in economic activity, leading to a significant decrease in the unemployment rate and an increase in average weekly hours. • By 2021 Q1 (3/21), we see another increase in average weekly hours and reduction in the unemployment rate, indicating that the economy is on the mend. 3. In the third phase, the unemployment rate is stable and hours per week decline. 4. A contraction occurs when unemployment rises and hours per week falls. Analysis:
Central Wisconsin Report - Fall 2020
9
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