Econ 550 - Assignment 3

A general slowdown in economic activity, a downturn in the business cycle, a reduction in the amount of goods and services produced and sold – these are all characteristics of a recession. The most recent recession began in December 2007 and ended in June 2009, though many of the statistics that describe the U.S. economy have yet to return to their pre-recession values (Bureau of Labor Statistics, 2012).

The auto industry held the number one position as the hardest hit industry during the economic downturn. A study by bankruptcy and restructuring professionals shows the auto industry led housing and retail as the most distressed industry in the U.S. Auto and auto parts makers had been slammed by dropping sales, pushing industry stalwarts such as GM, Chrysler, Ford and their suppliers to the brink of bankruptcy (U.S. News, 2008).

One of the most widely recognized indicators of the recession was the higher unemployment rates. In December of 2007, the national unemployment rate was 5.0 percent, and at the end of the recession, in June 2009, it was 9.5 percent (Bureau of Labor Statistics, 2012). The auto industry played a major role in those rates, as a direct result of plummeted sales by Ford, GM and Chrysler. Known as the Big 3, these auto makers lost hundreds of billions in revenue due to recession. Employees had to work for less wages, restrictions placed on overtime and unemployment pay, workforce reductions and factories were closed (Rosenberg, 2010, p. 150).

Note: People are classified as unemployed if they don’t have a job, have actively looked for work in the prior four weeks, and are currently available for work. The unemployment rate is the number of unemployed persons as a percent of the labor workforce (the total number of employed and unemployed persons). The long-term unemployment rate is the number of persons unemployed for 27 weeks or more (Bureau of Labor Statistics, 2012).

The number of job openings, or unfilled jobs, is an...