Macroeconomic Analysis: Demand-Supply Dynamics in the US Job Market

This essay provides a macroeconomic analysis of the US job market, focusing on the February job report and applying the principles of demand and supply. The report highlighted a lower-than-expected number of new jobs created, coupled with a significant year-over-year wage increase. The analysis attributes these trends to a potential mismatch between the demand for and supply of skilled labor, where high demand and limited supply drive up wage costs. The essay emphasizes the importance of monitoring employment trends to maintain a sustainable economic growth and suggests addressing any skilled labor shortages through policy changes, such as adjustments to immigration policies. It references the potential impact on the economy if unemployment falls below the natural rate, leading to unsustainable wage increases and economic overheating.

MACROECONOMICS
ARTICLE ANALYSIS
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ARTICLE SUMMARY
The given article discusses the job report for the month of February for USA. One of
the key highlights of this report was that the new jobs created amounted to only 20,000 which
is significantly lower than expectations and is seen as a blip in an otherwise strong job reports
being witnessed in the recent months. According to some economists, the low jobs creation is
quite disappointing but others intend to wait for future data points to provide any conclusion
on the economy (Cohen, 2019).
The jobs report also has some high points. One of these related to the y-o-y wage hike
of 3.4% which is the highest in a decade. Also, the unemployment rate witnessed a fall from
4% to 3.8%. Some analysts and economists attribute this strange job reports owing to the
government shutdown. However, there are some who highlight that it could be attributed to
shortage of skilled labor in the market. This points to potential concern in the market going
forward where there would be demand for incremental labor and limited supply which would
push labor costs (Cohen, 2019).
The government shutdown continued for majority of January and hence a number of
federal workers had to scout for part time opportunities. This trend was evident in January
which highlighted a spike in part time workers coupled with temporary unemployed.
However, with the shutdown over things have been normalized and there is high optimism
with regards to the economic. There has been a broad recovery of employment trends in
various regions and various businesses have sizable hiring plans for the remainder of the year
(Cohen, 2019).

APPLICATION OF DEMAND SUPPLY PRINCIPLE
The economic principle applicable to this article is employment along with demand
and supply. A key highlight of the job reports is the rising wage level along with low new job
creations. This can well be attributed to demand and supply of skilled labor. Owing to the
booming US economy, there is a higher demand for skilled labor. However, there is limited
supply of skilled labor in US as unemployment is already quite low. Owing to this potential
demand supply mismatch, the businesses are forced to pay a higher wage level for hiring new
employees. Also, at this wage levels, only limited recruitment is being carried out (Mankiw,
2014).
The jobs report play a pivotal role in ensuring that requisite measures can be
undertaken to support the economy and job market. It is imperative that the unemployment
should not drop below the natural rate of unemployment as this can potentially lead to
significant increase in the wage costs leading to heating of economy. Such a growth is not
sustainable in the long term and adversely impacts businesses and economy. Further, in case
of any shortage of skilled labor, relevant measures need to be undertaken through changes in
immigration policy to attract the requisite talent (Arnold, 2015).
Typically when there is increase in demand for labor, then the demand curve tends to
shift to the right leading to higher number of people being hired at higher wages. The
February jobs report is odd in this context that it hints at increasing wages while indicating at
significantly lower new hiring in comparison to previous month. Concerns regarding acute
shortage of economy may arise if this trend persists going forward (Krugman, 2015).

References
Arnold, A.R. (2015). Microeconomics (9thed.). Sydney: Cengage Learning.
Cohen, P. (2019) The Jobs Report Was the Weakest in Months. Here’s Why, Retrieved on
March 12, 2019 from https://www.nytimes.com/2019/03/08/business/economy/jobs-
report.html?rref=collection%2Ftimestopic
%2FUnemployment&action=click&contentCollection=timestopics&region=stream&
module=stream_unit&version=latest&contentPlacement=3&pgtype=collection
Krugman , W. (2015).Microeconomics (2nded.). London: Worth Publishers.
Mankiw, G. (2014) Microeconomics (6thed.). London: Worth Publishers.