jobs report today

jobs report today

The Impact of Jobs Report on the Economy

1. Introduction

The employment situation in the United States of America is one of the largest macroeconomic indicators that helps determine the overall state of the economy. It includes various levels of statistics that determine how many people are employed, unemployed, the unemployment rate, the level of unemployment, employment growth and many other vital statistics regarding the labour market. This information is then formulated into a report called the “Jobs Report” which is released by the US Bureau of Labour Statistics monthly. This report is key in determining the overall health of the economy, the Federal Reserve’s future policies and can even affect the stock market. This is due to the fact that it provides solid evidence of the current situation and future expectations in the labour market that can have a long-term effect on the overall state of the economy. The data in the jobs report is largely based on a survey of businesses and government agencies. It has a household survey component which is used to gather detailed information about the labour force including estimates of the different categories of employment and unemployment, persons not in the labour force, and those classified as employed or unemployed. The various statistics are based mainly on the US population but can also determine the situation of certain demographics such as gender, race, age and degree of educational attainment. This gives a very precise indication of how certain groups are faring in the labour market.

2. Importance of Jobs Report

What is good for society is also good for an individual industry or firm. It is generally assumed that the employer and employees have entered a “voluntary” contract of labor at a negotiated wage. The employer expects to use labor as a means of producing and selling a product. The employee expects to use labor as a means of earning income and easier purchase of said product. The employer’s and employee’s goals are mutual maximization of real wage and profit, at the costs of employing and providing labor, without incurring a loss in production and utility. If the employer has hired the employee to use more labor, the employee has agreed to provide more labor up to his marginal rate of time preference over his real wage. In simplest terms, all involuntary unemployment indicates a failure on the part of employers and employees to meet their goals and is an inefficient use of resources. This is because it is assumed the worker would not need to be pushed to work for less than he is willing to accept. Thus, decreasing unemployment and increasing employment and real income is a goal common to all participants in the labor market.

At a fundamental level, employment is a means to a very necessary end. For most people, a job is the primary, if not sole, means of income which, in turn, is the primary means of satisfying most people’s material needs. Without income, or a way to earn income, people can become burdens to others, a cost to society, as they rely heavily on government and private assistance to meet necessary needs. If too many people are dependents and not enough are income earners, resources are wasted and living standards decline. This is a gross loss of social output or real income and is precisely the sort of thing that economists would like to identify and measure. Thus, employment is a critical component of the productive use of resources and ultimately the standard of living in society.

Financial markets are very sensitive to the release of new economic information, and this is particularly true of the monthly employment report. For one or two days after the first Friday of each month, the financial news media are filled with stories about the release and possible implications of the most recent employment data. This data receives so much attention because of the key role that the labor market plays in the business cycle and also because it is unusually timely (published only a few days after the survey was conducted).

3. Analysis of Today’s Jobs Report

This month’s job situation is rated as “stable”. Forty-one percent of job seekers perceive the job situation as “bad” and forty-eight percent find that jobs are “hard to get”. These numbers affect our economy and spending in a huge way. People are less likely to spend money when they think they might not have a job for much longer. Typically, when the jobless rate increases, people are more frugal with their money. When people are not spending money, our economy slows because with a lack of demand for goods and services comes a lack of employment. As of now, the views on the job market are the same as the ones from a year ago in October 2011. In a positive light, two percent more people feel there will be more jobs available in the upcoming months. All in all, there will be no real change in the consumer’s views of the economy and their spending money until jobs become more plentiful. On another note, professional recruiting firms added 35,000 jobs in October and have added 170,000 jobs since a low point in September 2009. This is another sign that there will be more jobs available in the upcoming months. Rather than looking solely at job placement, the number of jobs added and laid off can be determined by looking at the Job Openings and Labor Turnover Survey. This survey provides insight into the dynamics of job creation and its effect on the economy. An indicator they study is the number of jobs gained or lost in a month. There were two hundred thousand more jobs gained than lost in the private sector this past October. This again is another positive note giving hope that there will be more jobs available in the upcoming months. With a current rate of 1500 jobs available, it may take a while, but our job market will improve and demand for workers will increase.

4. Implications for the Economy

2. This goal may have to be managed against any extra demand that is satisfied by import due to the spending leaking out of the circular flow. Excessive growth in aggregate spending that is not matched by an increase in domestic supply will lead to crowding out by increased interest rates and a further increase in import as a result of higher domestic prices. This can result in a current account deficit and put downward pressure on the exchange rate. If increased job growth has managed to increase the competitiveness of US exports, this inflationary growth in real GDP may result in pull inflation from an increase in AD and a favorable shift in the trade balance. Other things remaining equal, sustained job growth has the potential to shift the long-run aggregate supply curve to the right as there will be more labor available at every price level due to an increase in population. This will result in lower inflation as the equilibrium output and employment level have increased. Costs of sustained job growth are in the long run, increased employment will put upward pressure on real wage rates. Combined with the change in the age distribution of the population with a higher proportion of elderly people may lead to a shortage of skilled labor in certain industries. This can result in structural unemployment in certain industries because the skills of the unemployed do not match the skills demanded.

1. Continuation of strong job growth can affect the economy in several ways. If workers remain confident about their job prospects, they are more likely to increase their spending. It’s long been argued whether this increase in spending is due to an increase in wealth (from the stock market and/or home prices) as opposed to increased income. If the “wealth effect” is real and significant, then sustained job growth can cause an economic boom as increased consumer spending promotes further increases in employment and higher wages. However, the wealth effect is a controversial topic among economists because of its difficulty in proving whether a causal relationship actually exists between the two. In Keynesian terms, some of the increase in consumer spending may be a result of a lower marginal propensity to save caused by expectations of higher income in the future. This too can result in an economic boom if the level of aggregate spending is increased. High levels of consumer spending and increased aggregate spending will result in inflation and an increase in real GDP.

5. Conclusion

The present study has discussed the Jobs Report, which is one of the most important economic indicators used for policy-making and forecasting. It has been studied through the IS-LM Model and AS-AD Model to reach the effects of this report on the economy. In the IS-LM Model, it has been seen that when the Jobs Report shows a difference between anticipated and actual employment, it leads to a shift in the LM curve. An increase in employment than anticipated leads to an increase in money demand due to an increase in transactions/money. This shifts the LM curve right, leading to an increase in income and interest rates. If employment is less than anticipated, the opposite will occur. A movement in the LM curve will cause an adjustment process leading income to the point where the new real money demanded equals the old stock of real money, i.e., PY to Y’Y. Thus, a shift in the LM curve will lead to a change in national income but no change in the interest rate. So, the change in LM without a change in the interest rate is fundamentally different from changes in the other curves. This first effect of an unexpected change in employment in the jobs report on the interest rate and income is called the real balance effect. This was explained by the sticky wage theory. The short-run nature of this analysis was done by introducing price level and inflation changes into the sticky wage theory. At this point, our analysis was revised to use the AS-AD Model. The real balance effect is a change in the real money balances which leads to a movement along the LM curve. This will cause an increase in national income and a real appreciation of the currency. Thus, the real balance effect shifts the economy to a higher price level and a smaller output gap. Then it was seen that an increase in income to potential income will cause the stagflation to disappear by the neoclassical dichotomy but will lead to inflation. So the rate of employment will increase, but it will be at the price of higher inflation. The final effect of employment being drawn to potential employment was seen in the short-run aggregate supply curve (SRAS). A movement in the Y to YP was seen to shift the economy to the left of LRAS and thus decrease the SRAS. This reduces stagflation and clears the labor market at the new rate of employment. A change in the employment rate was also seen to be the only determinant of inflation in the short run. This whole analysis showed that the job report only leads to changes in the price level and the inflation rate and has no long-run effects on the real wage and the interest rate.