The changing size of the economy is an important determinant of current and future employment dynamics. As an economy grows – i.e. when more goods and services are produced – we can also expect a rise in employment. Conversely, if the economy contracts – as happens during periods of economic recession – then employment will probably fall.
Gross domestic product, or GDP, measures the size of an economy. It is an overall measure of the value of the goods and services produced by an economy over a particular timeframe, expressed in monetary terms (e.g. Euros). Similarly, the GDP growth rate offers an indication of the year-on-year percentage change in the value of the goods and services produced by an economy.
When an economy changes in size, it is often the case that the effect on employment takes time to materialise. In other words, there is a time lag between changes taking place in the economy and this then feeding through into the labour market. When the economy grows relatively fast, this can often result in skill shortages arise simply because education and training systems cannot respond to employers’ demand for workers and skills quickly enough.
Growth rate in Gross Domestic Product.
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