From the course: Economics for Everyone: Job Markets and the Economy

The importance of the jobs, jobs data, and the economy

From the course: Economics for Everyone: Job Markets and the Economy

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The importance of the jobs, jobs data, and the economy

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- Jobs and job data are not the economy in the same way that the economy is not the same thing as financial markets. Financial markets usually move ahead of the economy, and the economy usually grows before job growth occurs. This means that jobs tend to follow the business cycle and they follow economic growth. So when the economy slows, job growth slows. And when the economy improves, job growth improves as well. There is one catch though, and that's something called stickiness. It means that the labor market tends to get worse a lot faster than it improves. In other words, when there's a slowdown the unemployment rate can go up really quickly. But it tends to go down a lot more slowly. This is because jobs get stuck during periods of recovery as companies are concerned about making new hires after coming out of a recession. Data about jobs is really important because it shows us what's going on with people in an economy. And it's also important because how people behave in an economy impacts growth. People who don't have jobs aren't out there spending, and that can negatively impact financial markets, corporate profits, and business valuations. In countries like the United States where consumption, people buying stuff is 70% of the economy, people without jobs not buying stuff is a really big downside risk. Whereas if people have jobs and the labor market is good, that presents real upside for the economy.

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