Data Bases • Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism? Links • Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com Free Essays • Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • My Term Papers • Get Free Essays • Essay World • Planet Papers	Search Lots of Essays Back to Subjects - Economics Labor Demand Labor Demand Analyzing an employment report may not be the highlight of one’s day, but after reading the important points of one I realize just how useful and how much information can be extracted out by an experienced economist. The Business Week Online article “The Great Jobs Machine Starts to Downshift” deals with a wide variety of economic issues, ranging from job outlooks to unemployment reports to labor demand. My goal is to analyze and critique the issues in this article that are relevant to our class discussions. The beginning of the article, although confusing in wording, deals with the June employment report and how the Federal Reserve and others have reacted to it. The article then mentions that the unemployment rate is decreasing due to a slower job growth. If this slower job growth is due to a shortage of workers and not a decrease in labor demand, the article says that wages will continue to increase for workers. To further analyze this statement, supply and demand for labor must be used. A shortage of workers would be a decrease in the supply of labor (graph 1), which would decrease the quantity of labor but increase the wage at the same time. If the demand for labor has decreased and is the reason (graph 2), both the quantity and wages of workers would decrease, which is the worst scenario of the two. With this (hopefully) shortage of workers and increase in wages, an increase in spending in other markets would occur, bettering the economy in that respect. Later, the author states that service providers are adding jobs, but the service hiring is declining, due to the housing market making job cuts at real estate offices and mortgage lenders. This, as a result, causes wages in the finance, insurance, and real estate markets to drop off. As a further explanation, the wages in these fields have dropped because they are in effect complements with the housing market. Therefore, cuts in the housing market decrease the services that the finance, insurance, and real estate markets can provide to them, hurting their revenue and wages. Next, the article says that wage gains are increasing due to the labor demand “outstripping” (p.3) the supply of workers. Although I am not quite positive, I must interpret this to be occurring because more workers are being hired than there are workers entering the workforce. This would satisfy the statement that the demand is higher than the supply of labor. A wage increase could also be an inflation worry for the Federal Reserve. There might be cause for concern because higher wages could insinuate that the cost of living has gone up due to increased prices of products that consumers buy. However, the recent trend in real wages (wages adjusted for inflation) has fallen below real productivity. Therefore, an increased wage could simply be the result of the economy correcting this negative trend. It may not be a sign of inflation because productivity is so high that it must compensate for previously low wages. Further on, the article talks about a bigger wage-related concern for the Federal Reserve. Consumers have kept our economy booming due to spending carelessly and freely, and the concern arises out of whether they will continue this trend with higher paychecks. If so, companies will raise prices of their products and inflation will occur. If this occurs, there will be a larger difference between consumer’s nominal wages (wage paid today in current dollars) and real wages. Companies will increase prices when the demand for their products is high simply to increase their profits. When this happens, the market in the long-term fixes itself due to the law of demand, which states that as the price of a good or service increases, the quantity demanded of it decreases. So, theoretically, it is important to note this for economics sake. The article says that higher gas prices are hindering consumers from spending their income on other goods or services. Economics is the social science concerned with the official use of limited or scarce resources to achieve maximum satisfaction of our human wants, and higher gas prices are causing consumer’s real income to be lower and consequently our maximum satisfaction to be harder to achieve. To conclude, after absorbing all of this information from the June employment report, some interesting observations come to my mind. We have learned in class that at a certain price, markets will be stable, or in a state of equilibrium. If the labor supply continues to be strained and the demand for workers continues to increase due to high spending by consumers, what will be the result? It seems only reasonable that the wages of workers will be pressed upward. Also, the article talked about how the available workers are being absorbed because of the high demand for labor. Coupled with the increase in wages and the possibility of inflation, a lack of labor available seems to create a problem with price stability. One possibility to fix this problem could be to slow the labor demand or economic growth in some way, which seems to be steps in the wrong direction. Unless businesses slow down the hiring of workers, these are possible consequences that may occur in the future. Bibliography: none Word Count: 878
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