Sunday, January 31, 2010

Labor as a Production Factor & Unemployment

For those of you in AP Macro who are in or near the chapters dealing with unemployment and factors of production, here are a couple of articles that may be of use. Even if you don't apply them directly in class, the conclusions are worth your consideration. Both of them come via the Federal Reserve System.

The first deals with "It's Jobs not Discouraged Workers" and is on Macroblog, courtesy of the Federal Reserve Bank of Atlanta. The article examines the recent concern about discouraged workers reentering the job force and slowing the reduction in the unemployment rate. Authors Hotchkiss and Graefe seem to be of the opinion that the worry is misplaced. After looking at this article, I would have to agree. But I will look for more on the topic.

The second is "A Historical Look at Labor Markets During Recessions" and comes from the Economic Letter of the Federal Reserve Bank of Dallas. Much has been done comparing this recession to the Great Depression and to other post-World War II recessions. And while Martinez-Garcia and Koech show that this recession is not on the same magnitude as the Depression, it is, in many measures, worse than other post-War recessions. They graph the unemployment rate, civilian labor force growth, and non-farm payroll losses (both pre and post 1970) among other measures. At the very least, they provide some solid up-to-date data for use in your classroom discussions.

I encourage you to take a look and to share your comments.


Mike Fladlien said...

Tim, I confess I haven't read the articles, but I wonder how the classical and Keynesian economists would look at this...Classical economists say that the production function will shift to the left and markets will equate rapidly...Keynesian economists would say sticky prices will persist and the production function would not shift...What I think is that unemployment is a long ways from the natural rate of 5.2% and years too...

Tim Schilling said...

I suspect both have some elements of truth. I agree with the Keynesians that sticky prices are slow to adjust. I think the classical economists are right in that prices would can adjust. But the institutionalists would say that the reason wages and prices are sticky is because of the rules we put in place to accomplish other ends - be they social or political in nature.