The Business Cycle & Unemployment
Ronnie Tang, Tom Lewis, Ian Siow
Identify industries that are
particularly affected by cyclical changes
Examples of other industries
Changes in Stages
- Construction
- less output over winter.
- Utilities
- Gas higher in winter
- Electricity higher in summer
- Every industry experiences fluctuation in output and productivity levels.
- Fluctuation occurs because of changes that occur within the businesses and in the macroeconomic environment.
- No industry is immune from change.
These events trigger changes between
stages in the business cycle:
- Innovation
- Political events
- Random events
- Purely monetary phenomenon
- Immediate determinant
Use in planning
The Economic Cost of Unemployment
- Applied to forecasting
- Used as a reference to measure performance
- Used as reference to optimize business
- Improve productivity by allocating resources according to expected performance.
Stages of the Business Cycle
- Cyclical Peak
- Recession
- Trough
- Recovery
RETAIL Industry- Consumer Goods
- Christmas
- Mid year sales
- Every year, same time period.
Economic Costs
If GDP gap , Unemployment
Okun's Law quantifies relationship between GDP gap and Unemployment
- Unequal Burdens: Economic cost is unequally distributed
- Occupation
- Age
- Ethnicity
- Gender
- Education
- Duration
Non-Economic Costs
- Severe Cyclical Unemployment = Severe Idleness = Social Unrest
- Socio-political turbulence
- Racial/Ethnic Tensions
What Is The Business Cycle?
- Refers to the ‘ups and downs’ in the level of economic growth measured by REAL GDP
- Stages vary in duration and intensity
- Fluctuates around a predetermined growth trend
- Cyclical pattern
- However there can be non-cyclical fluctuations
- Seasonal variations
- Secular trend
Objectives
QUESTIONS?
- Outline the meaning and stages of a business cycle. What starts a turn in the cycle?
- Identify industries that are particularly affected by cyclical changes
- Explain the economic costs of unemployment using an AD/AS graph