Unemployment Lowers and Opportunity Rises-At least for Some

October was a great month for the unemployment rate. According to government data, 214,000 jobs were added last month and unemployment moved down to 5.8%. This is great news for those who are actively seeking employment and are counted in the rankings. Those in the lowest wage rungs haven’t seen much improvement in wages. 

As unemployment numbers decline it naturally soaks up the slack in the labor market. Higher skilled workers usually get the cream puff jobs while lower skilled workers will still be picking up crumbs. Typically higher skilled workers find employment faster because they are needed in penetrating growth sectors of society that rely heavily on education and specialized skills. 

Lower wage service jobs and part-timers will be stuck in lower wages until slack in the market is tighten to create demand-not so easy in a global world. Some lower wage workers may find new training opportunities that help them move into higher paying employment but others may simply stay in lower wage positions unless they actively seek to improve their own skills. 

Eventually wages will rise on all levels of society but inflation may eat up a higher percentage of its purchasing power. For example, people are paid more today than they were 30 years ago but their individual purchasing power has declined. It simply takes more money to live a middle class lifestyle in American today than it did in the past.

What mitigates this relationship is the cost of doing business and the productivity of the American worker. When infrastructure is strong, positive growth policies are enacted, cost of information transference is low, productivity rises, education is reasonably priced then the overall costs of business will be lower. Improving on productivity and lowering the systematic costs in society helps create new employment opportunities.  

Migration of Labor Skills as a Function of Opportunity

Labor is an important component of economic development. Employers need skilled labor to produce new products and lower skilled labor to fulfill standard functions. When areas gain or lose their workforce it has a natural impact on the economic strength of that area. Research by Son and Noja, 2013) delves into labor’s economic contributions as well as the influx/outflux of human capital in new EU countries. The general findings can be applied to other areas and highlight the need to match skills to the market. 

When surplus labor exists, the unemployment rate will be higher. In this study, the labor was broken into low and high skilled labor for analysis. Higher unemployment causes an outflux of individuals seeking opportunities in other geographic locations where jobs are plentiful. This is a natural cause of opportunity matching skills to create an employment opportunity. 

Those that update their skills and find new types of employment (labor shift) may more easily find future opportunities. It is an economic and personal choice based upon the ability to attend school, obtain new certificates, or move to locations that offer employment opportunities. There is a level of personal and societal adjustment that occurs in response to economic shifts in the market. 

When both low and high-skilled labor migrates out of an area it indicates the fundamentals of the infrastructure are not in place. Skill levels are not matching opportunities and those with the most resources can move to other areas to find greater opportunities. Losing highly skilled labor means  creating new opportunities will be more difficult in the future as a result of human capital drain. 

Destination countries that receive highly skilled labor have an easier time growing. This growth is based upon the skills received and whether or not they are matching the economic needs of the area. Sending countries slow down in technological progress, innovation and GDP per capita growth rate while receiving countries increase in their abilities to enhance economic growth. Sending countries will need to educate their populations to create greater home abilities and rebalance available skills to the market.

Son, L. & Noja, G. (2013). The role of the human capital and investment in human capital within the sustainable socio-economic development. How labour force migration affects competitiveness? Theoretical and Applied Economics, 20 (1).

The Benefits of Professional and Trade Certificates

What benefit does professional and skill certificates offer?  According to a 2012 Census Bureau it provides a level of growth and development. The certificate helps employers see that the job candidate has updated their skills and has kept pace with changes in the market. The certificate is another form of education even though no formal college degrees are earned. It provides an alternative track of learning new skills. 

The report also indicates that those with less than a high school education, a high school education, or an associate’s degree or less benefit the most. Over 80% of respondents indicate their employer rewards their efforts even though the amount of this reward ranges from $300 to $700 per year depending on the certificate. Those at the highest end of the education spectrum such as master and doctorate graduates have less use for the certificates. 

An employer may look at these certificates as an indication of motivation and skill development. If these certificates are relevant to them and contribute to specific positions they are likely to be seen as a positive attribute. A current employee who has updated their skills and can be more effective at their job is certainly better than one who doesn’t bother. 

This brings up an issue of trainability. Employees who are seeking to update their skills and knowledge are likely to also be more trainable than other employees. This means they can be groomed for higher responsibility and higher compensated positions. They are more open minded, willing to change, and able to keep updated on industry changes. 

The type of certificate earned is also important. A secretary that learns complex operations in Microsoft Office is certainly worth more than one who can only type a letter. The secretary is capable of moving into more complex database and tracking type work that helps the company. The same concept can be applied to skilled trades where a new welding cut or other skill can come in handy. 

Updating skills is important for both the employee and the company and should be justly rewarded. This reward is dependent on the type of certificate earned and its overall benefit to the organization. When employers and employees partner to determine what skills can be learned and how that benefits both parties there is likely to be greater congruence of perspective and effort. 

2012 Census Report

The Concept of Business Cycles and Recession in Economics

Economic cycles are a natural part of business life and have occurred in one form or another for nearly every generation. These boom and bust cycles exist in everything from the biological organisms to stock market investing. It is often beneficial to view economic theories of business cycles to understand how imperfect information impacts the national economy as it moves through these growth patterns. Such cycles are many years in the making and can have a devastating impact on the economy if recovery is not forthcoming.

Bob Lucas, a Nobel  Prize Laureate, developed a monetary theory of business cycles that helps explain economic growth spurts and decline (1972). To him, inaccurate perceptions of economic factors contribute to these cycles that push the system out of homeostasis. Firms, and their management, only have limited time and resources for understanding their environment and typically focus on only that information which is needed for their immediate purposes. It takes considerable amount of effort for firms to figure out what changes in the environment are temporary and what changes are more permanent. It is this inaccuracy that leads to market overreaction that veers the system off of course.

It is beneficial to see how this works in a smaller market. Organizations working within a localized market determine the prices they can reasonably sell their products (Lucas Jr., 1972). Price is impacted by the amount of purchases and the supply of  products. With perfect information quantities adjust to supply while prices respond to aggregate spending shocks. Accordingly, with imperfect information firms respond to aggregate spending shocks in the short-run but not the supply quantities in the long run. This can create overproduction which impacts the economic chain throughout a business cycle and even into the next generation.

A model developed by Paul Samuelson (1958) helps to further explain the concept of a generational contract. Two generations, one young and one old, are engaged in the market. The young sell part of their production to the old who give the young financial compensation. The young hope to save some of the money in the anticipation of purchasing products from the next generation. The entire process works off of anticipation and an implied social contract. It is believed that by producing today the young will reap the rewards of their work tomorrow.

The wider impact of this veering off of course can impact generational growth potentially breaking the generational economic cycle. Artificially adjusting the market in one generation could have an impact on the economic viability of the next. Using the above example it is possible to see how an economic problem is created if one generation cannot produce and save in order to purchase from the next generation. As the money supply dries up, underutilized human capital, and contraction limits employment opportunities it will effectively leave one generation worse off than preceding generations. To fix this problem may lay in expanding the market to other nations (i.e. selling of products and services) to use excess labor capital, improve investment returns, and create natural liquidity in cash flow.

According to Dobrescu and Paicu (2012), when additional monies are injected into the system the prices of products increases which causes inflationary pressure. In essence, the products are rising in monetary terms but not in their real earthly value. An injection of money from a large generation of people with easy credit will impact the amount of money available for the next and smaller generation who are selling their production. A large market expansion could cause a comparatively large contraction later. The excessive use of credit and debt artificially inflates the system while ignoring underlining market principles. A contraction in such a situation is likely to be more devastating when a products "real worth" becomes realized (i.e. housing crisis).

We learn that as economic firms overact to market increases they will increase production based upon price increases. If credit markets are artificially expanded to increase purchases it hedges out the next generations purchasing power and money supply. One of the generations will need to pay the debt back or default on the debt. There will be a large contraction, or market flux, when this money is not available for purchases of products that keep the generational exchange of money and labor in full growth. As the market contracts the GNP and economic system slows down. The cost of debt becomes over-burdensome in an economic recession creating additional difficulties in market clearance.

Boom and bust cycles are common in normal economic activity. Such boom and bust cycles often follow an increase in production and then a quick contraction as resources are used up (Sherman & Hunt, 2008). The same cycle can occur in credit markets, production of goods, housing prices, or even entire economies. When boom and bust cycles are large it can impact generational growth patterns as seen in a long-term economic recession. Before an economic system can move back into homeostasis it must complete a market clearing of excess supply and demand. However, excessive periods of market clearing mechanisms may change the underlining assumptions of the entire economic system.


Dobrescu, M. & Paicu, C. (2012). New approaches to business cycle theory in current economic science. Theoretical & Applied Economics, 19 (7).

Lucas, R. (1972). Expectations and the Neutrality of Money. Journal of Economic Theory, 4, pp. 103-124.

Sherman, H. & Hunt, E. (2008). Spread of the business cycle. Economics: An introduction and progressive views (6th Edition). Armonk, NY: ME. Sharp.