Interpretation of Macroeconomic Conditions
The Interpretation of the Statistical Data.
According to the Bureau of Economic Analysis (2010), the estimates released on February 26 indicate that the real GDP had an increase of 5.7 as an advanced approximation. It was based on more complete source data than were available for the estimates issued the previous month. If the economy was growing and the level of unemployment had decreased, this would mean that production would be short-run since there are plenty of people working in the oligopolistic and monopolistically competitive firms. This will lead to increased output of goods and services due to increased labor. The cost will however be high because of the number of people that need to be paid. On the other hand, high unemployment will result to production in the long-run due to decreased labor and low costs because not many laborers will require pay.
The Bureau of Labor Statistics (2008) which has defined inflation as the overall general upward price movement of goods and services in an economy gives CPI (Consumer Price Index) as one of the indexes that measure a particular aspect of inflation. The CPI is often used to raise or adjust payments for rents wages and other obligations that may be affected by the changes in the cost of living.
Therefore, in relation to low unemployment, the inflation would have the effect of high sales and high cost of labor since the economy is growing and many consumers would be able to afford goods and services albeit at high prices. However, when unemployment is high, the sales would be low since not many consumers will be able to afford the goods and services. In addition, costs in labor will be low for the firms.
According to the Bureau of Economic Analysis (2010), the personal income increased by 11.4 billion or 0.1 while disposable personal income decreased by 47.6 billion or 0.4 in January. This was in comparison to December which showed a 41.2 billion or 0.3 increase in personal income while DPI had a 40.3 billion or 0.4 increase. The reflection of this on the firms would show that sales would increase due to the fact that people would be able to afford to purchase goods and services because of an increase in personal income. This in turn would result in high cost of labor because of high level of employment as shown in December. In contrast to this, when level of employment drops, the sales will bear fruit in the long run. This would also mean lower labor cost due to a drop in incomes as depicted in January.
The Bureau of Labor Statistics (2010) show that the CPI-U (Consumer Price Index for all Urban Consumers) for January rose by 0.2 on a seasonally adjusted basis. Over the previous 12 months the index had increased 2.6 before seasonal adjustment. When this is related to high rate of employment, the sales for the competitive firms will go up due to the increase in the price index which means that the income for the consumers has risen and the cost of labor will also be high given that the laborers are at a substantial number. On the flipside, a high unemployment rate will mean that sales will be low in the short run and high in the short run as well as low costs of hiring laborers.
In regards to unemployment, the Bureau of Labor statistics (2010) reported that in February 2010 the number of unemployed persons was at 14.9 million therefore being basically unaffected resulting in an unemployment rate of 9.7. Among the major worker groups, the unemployment rates for adult men was 10.0, adult women 8.0, whites 8.8, blacks 15.8, Hispanics 12.4, teenagers 25.0 and Asians 8.4 showed little to no change in February. The number of long term unemployed i.e. those jobless for 27 weeks and over was 6.1 million in February and has been at that figure since December. About 4 in 10 people who are unemployed have been in that state for 27 weeks or more. Given this information published by BLS, the sales for competitive firms would be high if adult men and women, whites and Asians worked in them since their rates of unemployment are low. As for the rest, their rates would lead to low sales thus low cost of labor.
In conclusion, the economy seems to be growing shown by the steady growth in real GDP and Consumer Price Index while the rate of unemployment remains unaffected. The rate of personal income appears to have decreased. This statistics therefore mean that the oligopolistic and monopolistically competitive firms will attain high sales in the long run due to the unchanging nature of unemployment.