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January 24, 2024

Unemployment Case Analysis

Unemployment Case Analysis


Macroeconomics is concerned with behavioral, performance, and structural aspects of an economy. Fundamental components include consumption, unemployment, Gross Domestic Product (GDP), inflation, national income, international trade, among other elements. Herein, the developed case analysis will outline the selected macroeconomic situation from a reliable news article. The case analysis will be guided by both macroeconomic concepts and theories and will also highlight the impacts of the analyzed issue to the industry outlined by the paper. It will conclude by furnishing a possible recommendation to the analyzed issue from an economic point of view.

Unemployment Case Analysis

Description of the Unemployment Situation in the US in 2020

Unemployment is a situation whereby an individual whose services are utilizable and is within the labor age is not able to find a job despite actively searching for employment. The status is measured by an indicator known as the unemployment rate. The index can be defined as the percentage of the unemployed workforce out of the total labor pool. The estimate of unemployment in the United States has been relatively stable, ranging from three-point six percent in January to four point four percent in March. However, after the Covid-19 outbreak, it has risen remarkably to fourteen point seven percent in April. However, it has slightly dropped to thirteen point three percent in May (Rushe, 2020). The month of April and May has been characterized by downsizing and rampant layoffs by companies their bid to remain afloat.

Unemployment Case Analysis

The drop in the unemployment rate ensues from economic reopening that was closed in some parts of March and the whole month of April. It is attributed to measures to smother the effects of the Coronavirus pandemic. As per the latest Bureau of Labor Statistics, in terms of population numbers for the unemployment changes between April and May, the one point four percentage decline represented two million and one hundred thousand persons. Notably, the thirteen point three unemployment rate for May represented twenty-one million individuals. Markedly, the number of unemployed people has increased by fifteen million and two hundred thousand individuals since February this year. The highest unemployment rate ever recorded in the US was twenty-five percent during the considerable depression period.

Conceptual and Theoretical analysis of the situation

According to the classical unemployment theory, unemployment results when wages are unsustainable for employers to be willing to recruit more personnel. In the case scenario, the leading cause of unemployment is the poor performance of business due to the Covid-19 outbreak and economic closure by the government to contain the virus. It has resulted in two types of unemployment, namely cyclical and structural unemployment. Demand and supply forces are the main determinants of cyclical unemployment. Conversely, structural unemployment has been caused by government action through economic closure. Notably, both the cyclical and structural unemployment in the current state of affairs is involuntary as people are willing to work at the existing wage but are still unemployed.

Unemployment Case Analysis

Involuntary unemployment and the layoffs and downsizing witnessed can be elaborated theoretically through the implicit contract theory. It holds the assumption that labor agreements make it challenging for employers to reduce wages and instead opt for layoffs and downsizing. It is explained by the behavioral factors of both parties to the contract with the personnel being risk-averse while the employers being risk neutrals the possibility of layoff becomes the feasible alternative. The economic effects of the Coronavirus pandemic on employment can be mirrored on the social repercussions of the great depression.

Description of the Impacts of the Analyzed Issue to the leisure and the hospitality Industry

The most affected industry in the US by the analyzed issue is the leisure and the hospitality industry. For instance, since the outbreak, hotels have lost more than thirty-six billion US dollars in room revenue (Ahla, 2020). Unemployment in April recorded job losses for seven million and seven hundred thousand leisure jobs (Casselman et al., 2020). It is estimated that seventy percent of the immediate hotel personnel were furloughed or retrenched. Distinctive hotels and leading operators in the industry are projecting occupancy below twenty percent. Revenue losses for the year are expected to be at fifty-seven point five percent. According to Carrns et al., (2020), the industry is hoping to retain and gain back its personnel through the implementation of the rehiring bonanza along with the paycheck protection program with about one million and four hundred thousand jobs regained in May.

Unemployment Case Analysis

 Recommendations to remedy the issue from an Economic Point of View

Fiscal Policy

Some fiscal policies are critical such as tax deferral measures for large companies except those dealing with essential service to defer payment of tax to the fiscal year 2021 (Blanchard, 2020). Additionally, payroll tax relief and wage subsidies are also recommended because the companies need support to service the wage bill of their workforce. Similarly, direct subsidies by the government in efforts aimed at helping organizations maintain their employees. The creation of temporary part-time employment opportunities in the public sector will also help reduce the high unemployment rate. Cash flow support to businesses and affected industries, especially the manufacturing industry.

As for the unemployed individuals, the government should offer unemployment grants as well as promote structure for unemployment insurance benefits to sustain their consumption and expenditure (USA Labor, 2020). Other policy issues include exemption from social security contributions as well as forbearance, such as the provision of utility services to households in arrears and or at a discounted rate. The beneficiaries should include low-income earners.

Unemployment Case Analysis

Monetary Policy

Monetary and macro-financial policies should entail temporary suspension of all loans for a specified time, preferably three months period with the deferment of installments and interest without penalties to allow businesses to cushion them against the adverse economic effects (IMF, 2020). Other monetary policies include lower reserve requirements on financial institutions lending to Small and Medium Enterprises.

The Federal Reserve System should ensure that the interbank market is active and that it easily meets its liquidity needs as it indirectly affects the liquidity in the economy. Implementation of the repurchase agreement of government bonds by the Federal Reserve System for more than three months will provide necessary liquidity. Efforts to protect the capital market are proposed with the review of eligibility criteria for the guarantee for open market operations such as securities promulgated by non-bank institutions.

Unemployment Case Analysis


Despite the decline in the rate of unemployment in May, the economy is still expected to close the year at a ten percent unemployment rate. Such a trend can be attributed to the revival being buffered by government stimulus. Discharge of the economic stimulus such as the paycheck protection program implemented in the leisure and hospitality industry would result in readjustment to the initial unemployment rate. Therefore, the government must enact sufficient fiscal, monetary, and macro-financial policies to deal with the high unemployment rate resulting from the Covid-19 outbreak. apa.


Ahla. (2020). COVID-19’S IMPACT ON THE HOTEL INDUSTRY | AHLA. Retrieved 24 June 2020, from https://www.ahla.com/covid-19s-impact-hotel-industry

Blanchard, O. (2020). The three ways fiscal policy can be used to fight COVID-19 and the coronavirus recession – Equitable Growth. Retrieved 24 June 2020, from https://equitablegrowth.org/the-three-ways-fiscal-policy-can-be-used-to-fight-covid-19-and-the-coronavirus-recession/

Carrns, A., Phillips, M., Sullivan, P., & Glueck, K. (2020). Unexpected Drop in US Unemployment Helps Markets Rally. Retrieved 24 June 2020, from https://www.nytimes.com/2020/06/05/business/jobs-report-stock-market-coronavirus.html

Casselman, B., Cohen, P., Conger, K., & Haberman, M. (2020). US Jobless Claims Pass 40 Million: Live Business Updates. Retrieved 24 June 2020, from https://www.nytimes.com/2020/05/28/business/unemployment-stock-market-coronavirus.html

IMF. (2020). Policy Responses to COVID19. Retrieved 24 June 2020, from https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19

Rushe, D. (2020). US unemployment declines to 13.3% as the economy restores 2.5m jobs in May. Retrieved 24 June 2020, from https://www.theguardian.com/business/2020/jun/05/us-unemployment-may-great-depression-job-loss

USA Labor. (2020). US Department of Labor Announces New Guidance on Unemployment Insurance Flexibilities during COVID-19 Outbreak | US Department of Labor. Retrieved 24 June 2020, from https://www.dol.gov/newsroom/releases/eta/eta20200312-0