The relationship between United States unemployment and inflation rates during the Covid-19 pandemic. Background The covid-19 pandemic has led to higher unemployment rates in the United States than normal because many people were laid off jobs in response to the pandemic (Al-Fadly, 2020). It is important to analyze how such as sharp increase in unemployment affected inflation in relation to how unemployment have traditionally affected inflation. The overall relationship between unemployment and inflation has traditionally been an inverse one. It is argued that when unemployment rates are higher, the number of individuals who are looking for jobs usually becomes higher than the number of job positions that are available (Putnam & Azzarello, 2015). In such a situation, employers tend to pay lower wages because there is abundance of workers which naturally leads to a lower wage inflation. This study will examine the relationship between unemployment rates and inflation rate during the Covid-19 pandemic in the United States and whether it still remains to be an inverse one. Data I collected unemployment and inflation rate data from online sources. Monthly data of unemployment rate and inflation rate was collected for the period January 2020 to March 2021. The data is presented in the table below. period Unemployment rate Inflation rate Jan-2020 3.50% 2.49% Feb-2020 3.50% 2.33% Mar-2020 4.40% 1.54% Apr-2020 14.80% 0.33% May-2020 13.30% 0.12% Jun-2020 11.10% 0.65% Jul-2020 10.20% 0.99% Aug-2020 8.40% 1.31% Sep-2020 7.80% 1.37% Oct-2020 6.90% 1.18% Nov-2020 6.70% 1.17% Dec-2020 6.70% 1.36% Jan-2021 6.30% 1.40% Feb-2021 6.20% 1.68% Mar-2021 6.00% 2.62% Questions What is the correlation coefficient between unemployment rates and inflation rate in the United States? 2.What fitted linear regression model will be suitable to predict inflation rate from unemployment 3.How well does unemployment rates predict inflation rates during the cvid-19 pandemic in the United States. 4.Use the computed regression model to determine what the inflation rate would be if the unemployment rate was 5.9% 5.At what unemployment rate, will the inflation rate be approximately 0%
The relationship between United States unemployment and inflation rates during the Covid-19 pandemic.
Background
The covid-19 pandemic has led to higher unemployment rates in the United States than normal because many people were laid off jobs in response to the pandemic (Al-Fadly, 2020). It is important to analyze how such as sharp increase in unemployment affected inflation in relation to how unemployment have traditionally affected inflation. The overall relationship between unemployment and inflation has traditionally been an inverse one. It is argued that when unemployment rates are higher, the number of individuals who are looking for jobs usually becomes higher than the number of job positions that are available (Putnam & Azzarello, 2015). In such a situation, employers tend to pay lower wages because there is abundance of workers which naturally leads to a lower wage inflation. This study will examine the relationship between unemployment rates and inflation rate during the Covid-19 pandemic in the United States and whether it still remains to be an inverse one.
Data
I collected unemployment and inflation rate data from online sources. Monthly data of unemployment rate and inflation rate was collected for the period January 2020 to March 2021. The data is presented in the table below.
|
period |
Unemployment rate |
Inflation rate |
|
Jan-2020 |
3.50% |
2.49% |
|
Feb-2020 |
3.50% |
2.33% |
|
Mar-2020 |
4.40% |
1.54% |
|
Apr-2020 |
14.80% |
0.33% |
|
May-2020 |
13.30% |
0.12% |
|
Jun-2020 |
11.10% |
0.65% |
|
Jul-2020 |
10.20% |
0.99% |
|
Aug-2020 |
8.40% |
1.31% |
|
Sep-2020 |
7.80% |
1.37% |
|
Oct-2020 |
6.90% |
1.18% |
|
Nov-2020 |
6.70% |
1.17% |
|
Dec-2020 |
6.70% |
1.36% |
|
Jan-2021 |
6.30% |
1.40% |
|
Feb-2021 |
6.20% |
1.68% |
|
Mar-2021 |
6.00% |
2.62% |
Questions
- What is the
correlation coefficient between unemployment rates and inflation rate in the United States?
2.What fitted linear regression model will be suitable to predict inflation rate from unemployment
3.How well does unemployment rates predict inflation rates during the cvid-19 pandemic in the United States.
4.Use the computed regression model to determine what the inflation rate would be if the unemployment rate was 5.9%
5.At what unemployment rate, will the inflation rate be approximately 0%
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