Table 5 Lifecycle of the Expansion
Description: • Table 5 shows two charts that plot the unemployment rate against average weekly hours in manufacturing on a quarterly basis since the beginning of the current economic expansion in September 2009. • There are four phases: • In the initial phase of an expansion, unemployment is stable and remains high while there is a sharp rise in hours per week. • In the second phase, the unemployment rate falls while hours per week tend to be relatively stable. • The top chart suggests that our expansionary phase may be coming to an end. In Q3 2022, average weekly hours fell while the unemployment rate was unchanged compared to Q1 2022. In the last stage of an expansion before a contraction, employers often reduce employees’ hours before beginning layoffs. This, however, could be a one-off result. We need to see more. • The bottom chart clearly shows the stark difference between the two most recent business cycles. • The solid blue line begins in Q1 2008, the beginning of the Great Recession. From Q1 2008 to Q1 2009, both average weekly hours and the unemployment rate increased indicating a recession. The recession officially ended in Q1 2009. After Q1 2009 during early phase of the expansion, average weekly hours increased while unemployment remained high. After Q4 2010, average weekly hours continued to climb while the unemployment rate began to fall. Q4 2019 was the last quarter of a very long and slow recovery and expansion. • The dotted red line shows the sharp reduction in average hours and dramatic increase in the unemployment rate from Q4 2019 to Q2 2020. It also shows a rapid recovery after Q2 2020 with rapid reduction in unemployment rates and increases in weekly hours. • The two very different trajectories of these business cycles reflect the impacts of two dissimilar causes of economic recession. The slow recovery and expansion after the Great Recession was the result of severe imbalances within the financial system; it took a considerable amount of time for households and businesses to repair their balance sheets. Our more recent experience reflects the impact of the Covid-19 pandemic which was a true shock coming from outside the economic system. The rapidity and scale of the shock along with the swift recovery is reflected in the shape of the business cycle. • In the third phase, the unemployment rate is stable and hours per week decline. • A contraction occurs when unemployment rises and hours per week falls. Analysis:
Central Wisconsin Report - Fall 2022
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