Question

This question requires that you do some research into recent trends in the labor market and and to use that information to draw a conclusion that can be transferred to an aggregate supply and demand model to draw a conclusion about impacts on prices and output. Please, include a “picture” of an aggregate supply and demand model. You can “make” the picture from scratch if you want. You can borrow a picture so long as you don’t claim it as your own. You can “borrow” one form an online source starting with google image search or some other search engine.

a. In your estimation has the labor market been tightening over the past year or so? Do you think this tightening will continue or not? Provide some evidence including citations. What does this tightening (or not) of the labor market mean for firms and workers?
Note that may or may not make sense.   There is a bit of an endogeneity problem between part a and part b of this question. You are asked to look at the labor market and then transfer that to the aggregate supply and demand economy wide model. You may, at first be confused, because one could start with the economy-wide model and work back to the labor market. For the purpose of this question start with the labor market and move to the economy wide interpretation. If this confuses you, don’t worry.

b. Based upon your conclusion in part 1a regarding the generally defined labor market, if nothing else changes in the US economy, what will result in the aggregate supply and demand model from events in the labor market. For more than half-credit you need to include a graph or picture showing the economy before and after the change in the aggregate supply and demand market.

Answer 1

Part a)

According to McGrew and Hendricks (2018) the recent tightening of the labor market has affected different sections of the society disproportionately based on race,marital status and similar demographic characteristics.The Trump administration inherited an economic era that had been set up by Obama Administration characterized by interest rate cuts and a consistent reliance on Keyneseian notion of increased economic stimulus from the government and expansionary fiscal policy to stimulate various economic sectors.However, as observed by the authors, the employment level of the minority groups especially Blacks and Hispanics have decreased remarkably compared to the White counterparts who are at a relatively less risky position in job market.Furthermore, as indicated by a nationwide data publsihed by Current Population Survey Data for Social,Economic and Health Research, unmarried/single/uncohabiting individuals (both male and female) are more affected by the recent tightening of the job market as the unemployment rate is higher among them compared to the married individuals (again both men and women). It further implies that married individuals are more likely to have higher educational qualifications and diversed professional skills required to eligible in different job sectors in comparison to their single counterparts tereby advocating a direct correlation between marital status and educational and professional qualifications.These are the trends that have observed during the first quarter of 2018 when the BLS (Buereau of Labor Statistics) reports on labor market had been published. The population survey data also identifies that the black individuals have experienced the highest unemployment rate higher by a substantial margin than that of their counterparts from other racial groups combined. The report further documents that the unemployment rate is highest in the country evidently among black single individuals.

The population survey data also reveals that married women are more likely to engage in part time jobs compared to married men based on current labour market trends implying that unlike married men married women are still dedicated much time on household activities and not so much time on external commitments.From an overall persepective, however the situation does not seem to be too much bleak as the overall unemployment has remained stable and below the great recession period at around 2.57% in the last quarter of 2017 according to a statistical report conveyed by Federal Reserve Economic Data, Federal Reserve Bank of St.Loius.This is evidently lower than the unemployment rates of last quarter of 2015 and 2016. Therefore, the tightening of the labour market has spread disproportionately across different racial groups, marital status and also different age groups. This trend is expected to continue in future if the administration is only satisfied by the overall employment scenario and thus more emphasis is required on the impact of labour market situation across various demographic features of the population (McGrew and Hendricks, 2018). The Trump administration has not issued any large scale emonomic stimulus package to generate higher employment opportunities that would cover all economic sectors and will be effective all demographic groups.Hence policies should be formulated with a more specific attention towards the disadvanatged sections of the society and not just the overall economy if the current trend has to be altered for the future.The government should implement measures to ensure high quality jobs with sustainable wages that would be available to all sections of the society otherwise the disproportionate tightening of the labor market is expected to persist at least in the near future.

The recent trends of labour market tightening does have a disbalanced impact on the workers. The disporportionate labor market participation as indicated by the abovementioned studies indicate a labor force discrimination that has affected certain section of the labor force based on racial identity, age group and marital status. It essentially leads to an undesirable outcome in the labor market where there is no full employment and disporportionate employment in different sectors of the economy.Racial discrimination in the labor market means that certain racial groups are still disadvantaged even having equal credentials compared to their counterparts. Furthermore, low full time jobs by married women might indicate a certain level of glass ceiling that these women still encounter in the labor market because of their excessive household commitments.From the point of view of firms, it indicates unoptimal or undesirable production level as the labor force in the economy is not fully utilized at the optimal level.For most firms, the production techniques have dramatically changed in recent years with increased mechanization, economies of scale, input specialization, product differentiation and so forth which have collectively reduced the demand for traditional labor work in the production line. But nonetheless, disproportionate laborforce participation will still affect the production level as the skills levels are not utilized in many sectors such as service sectors, IT and some pf the manufacturing sectors as well so the firms have to focus on balanced hiring, on job training for the potential employers and more more support system for the labor force to enhance their skills and potentials and thus eligibility in the market (Ordman, 2018).

Sources

https://www.bloomberg.com/quicktake/monthly-us-jobs-report

https://www.americanprogress.org/issues/economy/news/2018/02/01/445708/state-u-s-labor-market-pre-january-2018-jobs-release/

https://jobs.ieee.org/jobs/content/US-Labor-Market-Trends-2018-Gig-Economy-Strengthe-2018-01-03

Note:You can change the citation style according to the specifications of the assignment.