Wednesday, February 2, 2011

Nice graph showing the relationshp between GDP and Employment. The evidence shows hiring HAS to increase soon, doesn't it?

Carpe Diem
The above graph shows the relationship between Real GDP (RGDP) and Employment since the official beginning of the recession. There is a direct relationship between the percentage decrease in RGDP and employment. Makes sense. Produce fewer goods and services businesses need fewer people.  In the spring of 2009 we see the two lines intersect. At this point RGDP starts an upward trend.  Recovery is at hand!! As businesses pick-up the pace of production, we might expect employment to stop dropping and level off as businesses cease laying-off/closing.  However, the relationship between RGDP and employment turns INVERSE at what appears to be an accelerating rate. RGDP increases at an increasing rate, but employment recovers only slightly and stays relatively constant. Looking the last points to the right on the graph, RGDP is now back to pre-recession level BUT employment is severely lagging behind to the tune of 7+million fewer workers employed compared to prior to the recession.

Gotta think that something is going to give. If RGDP continues to improve, the productivity of existing workers is going to be milked for all it is worth. They may be evidence that worker productivity is declining currently.  Businesses will have to hire more workers to keep up productivity and meet existing demand for goods and services. 

Barring a major crisis or escalating oil prices, I have to think we will see an improvement in the employment situation...Perhaps I say this because I want my (YOU!!) students to be optimistic and see there is still a future for them, even in these tough times...
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