ECO 412 Total Employment Project

ECO 412 Total Employment Project - Total Employment:...

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Total Employment: Prepared by: Prepared for: April 2007 1
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TABLE OF CONTENTS Introduction ----------------------------------------------------------------------------------------3 Background and Importance of Total Employment ------------------------------------------3 Recent Historical Trends in the Labor Market ------------------------------------------------4 Inflation vs. Employment ------------------------------------------------------------------------5 Current Employment Trends and Analysis ----------------------------------------------------6 Federal Funds Rate and Total Employment ---------------------------------------------------7 Policy recommendation ------------- TABLE OF FIGURES Figure 1 Total Employment during the Great Depression ----------------------------------4 Figure 2 GDP v.s. Time; Peaks and Troughs -------------------------------------------------4 Figure 3 Change in Employment vs. Inflation Rate -----------------------------------------6 Figure 4 Target Federal Funds Rate vs. Total Employment --------------------------------8 Figure 5 Percent Change in Total Employment ----------------------------------------------9 Figure 6 Change in Employment vs. Change in Unemployment --------------------------10 Bibliography --------------------------------------------------------------------------------------12 2
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Introduction In this paper we are going to look at the current and future conditions of the labor market by analyzing the total employment aspect, which will, in turn, allow us to make a policy recommendation to the Federal Open Market Committee. To do this, it is important that we have a strong understanding of what total employment is. After this is fully understood, we need to review the recession of 2001 as well as the “jobless recovery” that occurred following the recession. This time period is an important aspect of what is currently happening in the labor market because the current level of employment is indicative of past economic conditions. The next part of the report will be focused on discussion of the Phillips Curve and how the Fed sets its federal funds rate to counteract an increase in inflation or a decrease in percent change in employment. We will evaluate the graph and discuss how a change in the federal funds rate will affect this tradeoff. The following section will be used to scrutinize the current employment conditions of the labor market and do graphical analysis on different recent trends. The final part will be used to correlate all of the information and determine the appropriate policy recommendation for the FOMC. Background and Importance of Total Employment According to Yahoo Education, the definition of employment basically means, “the percentage or number of people gainfully employed” (“Employment”). By definition alone, we can see that total employment is an important issue that has great implications on the future of monetary policy. When the Federal Reserve sets the monetary policy one
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This note was uploaded on 04/06/2008 for the course ECO 412 taught by Professor Staff during the Spring '05 term at Kentucky.

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ECO 412 Total Employment Project - Total Employment:...

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