How does an increase in labor supply affect unemployment?

Labor supply and demand When unemployment is high, the number of people looking for work far exceeds the number of jobs available. In other words, the supply of labor is greater than its demand. However, in the long term, the increase in the profitability of companies leads to an expansion of employment that will eventually (if there are no further changes) restore real wages and return the economy to its initial unemployment rate. Figure 9.15 A company increases production and employment after an increase in demand as a result of monetary or fiscal policy.

This can tell us which industries experienced labor shortages or surpluses and how severe these are in the overall economy. This is intuitive because the elasticity of labor demand tells us how sensitive the hiring decisions of companies are to changes in wages. Although employment is low, the mining and logging industry had one of the largest proportional increases in the number of unemployed workers with experience. The Current Population Survey (CPS) produces a wide range of data, including measures that can be used as an indicator of the country's labor supply.

The labor supply curve tells us how many workers are willing to work for a certain wage; those who do not have a job are looking for work. The increase in the amount of labor that people would like to provide and the decrease in the amount of labor that companies demand serve to increase unemployment. The arts, entertainment and recreation experienced a modest decline in job offers, from 121,000 to 103,000 during this period, while the number of unemployed workers with experience increased from 141,000 to 586,000. These policies initially work by increasing the number of people out of work and, therefore, by shifting the wage-setting curve downward, as in the case of immigration.