TAILIEUCHUNG - Economic Growth and the Unemployment Rate

Studies have found a few exceptions: changes to estate, inheritance and gift taxes have a small effect on the number of tax returns filed in that state, although some of that decline may be due to households filing from a state where they have a second home. A study of New Jersey’s half-millionaire’s tax suggested that households with incomes over $500,000 were no more likely to leave New Jersey after the higher rate was adopted. The only groups with an identifiable response were rich households with heads age 65 and older and ‘super-rich’ households (in the top percent), who. | Economic Growth and the Unemployment Rate Linda Levine Specialist in Labor Economics January 7 2013 Congressional Research Service 7-5700 R42063 CRS Report for Congress------------- Prepared for Members and Committees of Congress Economic Growth and the Unemployment Rate Summary A persistently high unemployment rate is of concern to Congress for a variety of reasons including its negative consequences for the economic well-being of individuals and its impact on the federal budget. The unemployment rate was when the economy emerged from the 11th postwar recession in June 2009. It climbed further to peak at in October 2009. The rate has slowly declined since then. Although it dropped below 8 in the fourth quarter of 2012 the unemployment rate remains high by historical standards. After most postwar recessions it took at least eight months for the unemployment rate to fall by one full percentage point. The slowest decline occurred following the 2001 recession s end when the unemployment rate was a comparatively low . About 3 2 years elapsed before the rate fell just one-half of one percentage point. In contrast the recovery from the severe 1981-1982 recession began with the highest unemployment rate of the postwar period . In that instance it took only eight months for the rate to fall over one percentage point. Some hoped the unemployment rate would fall as quickly after the 2007-2009 recession but the speed of improvement has been more typical of the so-called jobless recoveries from the 2001 and 19901991 recessions. What appears to matter for a reduction in the unemployment rate is the size of the output gap that is the rate of actual output economic growth compared with the rate of potential output growth. Potential output is a measure of the economy s capacity to produce goods and services when resources . labor are fully utilized. The growth rate of potential output is a function of the growth rates of potential productivity and

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