Business Cycles and Concepts

Sabrina Negron
Unit 4: Business Cycles and Concepts

Abstract
An employee of the World Bank has been asked to research unemployment concerns in Chile and to write a report of his/her findings. The employee has been asked to research data sets for unemployment and state the relationships between unemployment and Chile’s economy. The employee must answer what trends he/she finds in the data sets and to support those trends with statistical evidence.

In today’s economic turmoil one only needs to look at Chile to gain a better view. According to www.thisischile.cl the country is ranked second according to the Economic Climate Index (ICE). Chile is ranked second after Brazil in Latin America. Chile has reached a 7.8 ICE score a vast improvement over the 1990 score of 2.9. According to the New York Times (2011) “Chile is home to the world 's largest copper producer.” Chile also produces wines and fruit with agriculture accounting for 15 percent of Chile’s total exports. As stated by Krugman & Wells (2009) “Unemployment is the number people who are actively looking for work but aren’t currently employed.” Krugman & Wells (2009) also states that “The unemployment rate is the percentage of the total number of people in the labor force who are currently not unemployed.” A country’s economy has a direct effect on the unemployment rate. If the economy is good unemployment rates are usually low, if the economy is bad the unemployment rate is usually high. Chile is currently enjoying a stable economic climate with unemployment numbers reaching an all-time low of 7.4 percent. This is down from a historical high of 11.60 percent in 2009 and a record low of 8.50 percent in 2010. The unemployment concerns relate directly to a countries economy. When the unemployment rate is low it is relatively easy to find work when you are actively looking for employment. Of course when people are employed they feel more secure, so they feel better about spending more money therefore, increasing the economy. This also directly has an effect on microeconomics as well. When people feel secure and they spend more money increasing the supply and the demand curve and when there is more demand more employees are needed to meet that demand there by affecting the unemployment rate. When the unemployment rate is high people have a much more difficult time finding employment. This is a direct result of a low economy. When people feel insecure about their employment prospects they tend to button down and cut corners to keep costs down. This in turn affects the supply and demand curve. When demand is low less people are needed to meet that demand prompting layoffs. Layoffs that in-turn has an effect on the unemployment rate. Another relationship that directly affects both the economy and the unemployment rate is population. Chile has a population of 16,601,707 people and the population gives us our labor force. The labor force participation rate is the percentage of the population that is sixteen or older that is in the labor force. (Krugman & Wells, 2009). The labor force is the people who are working and the people who are looking for work. Changes to the population greatly affect a country’s unemployment rate. If you break down the population into age groups you could see the changes how changes in the population effect unemployment rates. Let’s say that a portion of your population is hitting retirement age, you would no longer need to count that portion of the population is no longer counted in the labor force participation rate. Baby boomers are also something to watch out for. A surge of baby boomers into the work force would need to be counted amongst the labor force causing a change to the unemployment rate. Watching a country’s population to help predict the unemployment rate and change to the economy is the basis of macroeconomics. The trends I see in the data sets are that as Chile’s government re-establishes itself the country is continuing to benefit by the changes being made in the economy. As the country continues to prosper the unemployment rate has seen a steady decrease since 2008. In 2007 Chile’s unemployment rate was 10.10%, in 2002 it was 9.19%, in 2003 it was 8.5%, in 2004 it was 8.5%, in 2005 it was 8.10, in 2006 it was 7.8%, in 2007 it was 7%, in 2008 it was back up to 8.5%, in 2009 it was 9.6%, in 2010 it was 8.69%, and finally in 2011 it is 7.1%. Chart information (www.indexmundi.com)
The Chilean unemployment rate dropped to 7.1 percent as more Chilean people found even more employment opportunities in the mining and agricultural sectors. The estimated total population of Chile was 17,000,000 people in 2011. Chile’s economy has grown over 6 percent since it’s recession in 2009. As long as Chile holds firm in the recovery it has made since the recession of 2009 unemployment rates should be expected to level off as changes to the economy and changes in the population naturally occur. In conclusion Chile’s economy has a direct effect on the countries unemployment rates. We also learn that Chile’s economy is directly related to the economy of other countries. Chile’s chief trading partners are the U.S., China, Brazil, Argentina, and South Korea. So if the economy is suffering in any of these countries that imports would be in less demand so exports from Chile would be in less demand as well affecting the economy of Chile and also the unemployment needs of the Chilean people. Natural changes in a countries population also affect the unemployment rate of that country.
References
Chile comes in second in Latin America in economic climate ranking. (2010). Retrieved from http://www.thisischile.cl/Article.aspx?id=3134&sec=190&itz=&eje=&idioma=2&t=Chile-comes-in-second-in-Latin-America-in-economic-climate-ranking
Chile. (2011, August 5). The New York Times. Retrieved from http://topics.nytimes.com/top/news/international/countriesandterritories/chile/index.html
Krugman, P. & Wells, R. (2009). Ecomomics. [Online version]. Retrieved from AIU Online Virtual Campus. Macroeconomics: ECON224-1101A:17website.
Chile Unemployment Rate (2011). Retrieved from http://www.indexmundi.com/chile/unemployment_rate.html

References: Chile comes in second in Latin America in economic climate ranking. (2010). Retrieved from http://www.thisischile.cl/Article.aspx?id=3134&sec=190&itz=&eje=&idioma=2&t=Chile-comes-in-second-in-Latin-America-in-economic-climate-ranking Chile. (2011, August 5). The New York Times. Retrieved from http://topics.nytimes.com/top/news/international/countriesandterritories/chile/index.html Krugman, P. & Wells, R. (2009). Ecomomics. [Online version]. Retrieved from AIU Online Virtual Campus. Macroeconomics: ECON224-1101A:17website. Chile Unemployment Rate (2011). Retrieved from http://www.indexmundi.com/chile/unemployment_rate.html