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Case Study on Chevron

Autor:   •  March 8, 2012  •  Essay  •  290 Words (2 Pages)  •  1,612 Views

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Increasing levels of unemployment tend to be the by-products of recessionary macroeconomic conditions. The unemployment rate does not rise sharply but slightly before the peak as an indicator of a recession nor does it significantly fall at the trough or in the immediate expansion after the trough to forecast growth. If we look back at the last couple of recessions, we can actually observe the time delay between the end of a recession and peak unemployment rates. For instance, the recession of the early 80s, which was mainly caused by sharply increasing oil prices around the world, ended in November 1982, but the unemployment rate remained at above 9% for one extra year. The recession of the early 90s, which was partially caused by the start of the Gulf War and by the resulting 1990 spike in the price of oil, ended in March 1991; however, the unemployment rate continued increasing to 7.50% in 1992.

The recession caused by the dot-com bubble in the early 2000s ended in November 2001, but yet the unemployment rate continued rising for two years, reaching 5.99% in 2003. The most recent recession that we are experiencing is different than the typical recessions just mentioned. Unemployment in June 2009 reached 9.51% and will most probably top 10% towards the end of this year. Given these conditions, we contend that unemployment may have a feedback effect on gross domestic product (GDP) and that it may likely act as a leading indicator, putting pressure on consumption and attenuating growth in the long term.

In sum, given the current magnitude and uptrend of the unemployment rate, we believe that it would be more appropriate to view this metric as a leading indicator instead of a lagging one.

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