Employment, Unemployment and Inflation Topic Index

EconData Online keeps you informed on today's most crucial economics data. Steve Hackett and Bud Culbertson (Humboldt State) provide commentary, analysis, and current and historical data. Return to EconData topic index.

Data Connections and Additional Resources
Civilian Unemployment Rate

The unemployment rate is the percentage of the overall labor force that is unemployed. The labor force is made up of all people 16 and older who are either employed in a job or are unemployed but seeking work. Children, homemakers, retirees, students (who do not have jobs), and discouraged former workers are not included in the labor force.

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Consumer Price Index (CPI)

The Consumer Price Index (CPI) is one of the most prominent measures of inflation in the cost of living experienced by the typical household. The CPI is calculated by selecting a fixed "market basket" of goods and services-groceries, electricity, shoes, and so on--and tracking the overall price of this fixed market basket over time.

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Labor Cost Per Unit of Output

Rising unit labor costs pressure firms to raise prices, which can trigger accelerating inflation. Because unit labor cost reflects the net effect of changes in worker compensation and labor productivity, it is considered a more important inflation indicator than either compensation or productivity alone.

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Labor Productivity

Gains in labor productivity allow wages to rise without the threat of inflation. Higher labor productivity means that more output is produced for a given quantity of labor input. The firm can use some or all of the incremental revenue gain to raise wages without the need to raise prices.

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Money Supply (M2)

If the money supply is growing too slowly, interest rates will rise. Higher interest rates reduce debt-financed spending, and thus slow the rate of economic growth. As economic growth slows, unemployment will tend to rise. In contrast if the money supply grows too rapidly, demand-pull inflation may occur as too much money chases too few goods, and tight labor markets put upward pressure on wages.

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Real GDP

The business cycle helps us understand the relationship between real GDP, unemployment, and inflation. During peak periods of the business cycle when the economy is experiencing rapid growth in real GDP, employment will increase, and unemployment decrease, as businesses seek workers to produce a higher output. If real GDP grows too quickly, however, it can cause price inflation as firms are forced to bid against one another for increasingly scarce workers. In contrast during trough periods of the business cycle the economy is experiencing declines in real GDP, and unemployment rates are high.

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