During recessions employment is unusually low and the unempl

Solution

The unemployment rate increases whenever the overall economy undergoes a recession. Unemployment has risen much more than in other recent recessions, and the unemployment rate has remained high for an exceptionally long time. The weakness of the recovery in real economic output and the slow rate at which workers find new jobs at least two reasons why the unemployment rate could stay high for some time. Most of the increases in the unemployment rate results from cyclical factors; that is, factors that ordinarily would have only a temporary effect and should gradually fade as the economy recovers. The start of a recession is marked by an increase in layoffs and a decrease in hiring. As the economy begins to recover, layoffs usually stabilize just before the unemployment rate peaks. Long-run unemployment trends are important for understanding an economy\'s productive potential. The longer we exceed the natural rate, the longer we waste our resources.

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