In February 2020, just prior to the economic shutdown resulting from the Covid-19 pandemic, the unemployment rate in the United States was 3.5% (the lowest it had been since 1969!). With the economy essentially going into lockdown as a result of Covid-19, the unemployment rate in the United States skyrocketed to 14.7% just two months later, in April 2020. Now, two years later (April 2022), the unemployment rate has nearly fallen back to pre-pandemic levels and sits at 3.6%. (Note: The U.S. Congressional Budget Office (CBO) currently estimates the natural rate of unemployment for the U.S. economy at 4.45%.)

Unemployment rates this low are often viewed as being very good for the economy, so explain how low unemployment rates benefit the economy in terms of the following:

• productivity and GDP growth
• wages and wage growth
• consumer confidence
• labor supply & demand
• entitlement spending (make sure you understand the term "entitlement spending")

Unemployment rates this low can also be viewed as being detrimental to the economy, so explain how low unemployment rates may also damage the economy in terms of the following:

• productivity and GDP growth
• employee loyalty
• potential inflation
• labor supply & demand