again see unemployment of 5% or less and indeed we’ve arrived at that point. I particularly like this article as it too looks toward the future. On p. 2, a key sentence says, “Over the next 20 to 25 years, a labor shortage is going to put a binding constraint on growth.” Let me explain as this is a key part of our course that will come up multiple times. Consider this equation: real GDP = ((real GDP / workers) • workers). This equation is true as workers cancel out on the right hand side of the equation leaving real GDP = real GDP, which is obviously correct. Next, real GDP / worker is the “worker productivity” mentioned in an earlier article and it has been growing slowly for some years. This article describes how the number of workers will grow slowly in the years to come and via this equation, this translates into slower growth in real GDP (which of course is economic growth). Key Terms: The “labor force” (sometimes called the “work force”) is all those who are working or are looking for work. If you are not in the labor force you’ve decided that you don’t wish to work. Adults in this category include retired people, full time students, and parents staying at home with their children. The “unemployment rate” is the percent of the labor force that are unemployed. One is unemployed if you are not working but actively seeking a job, such as interviewing or responding to job ads. By this definition, if someone quit searching for a job they are not counted as unemployed. Thus, retried people are not unemployed. Questions: 1. What has been happening to “workers’ median earnings” for the last two years? Is this like or unlike what has happened in recent years? Have we seen an article that mentioned this before? 2. How have manufacturing jobs changed in recent years? 3. Do Alan Kruger and Mark Zandi forecast labor surpluses or shortages in the years to come?
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- Fall '10