Explain how the management of people tends to vary depending on whether a labour market is tight or loose. Illustrate your answer with examples from your own observations and your reading.

Introduction

The macroeconomic context serves as an important indicator of labour market activity, which in turn defines the scope of how organisations hire, engage, and develop their employees in accordance with the overall organisational objectives. HR professionals who are aware of the different interconnected aspects that exist within this dynamic will be better equipped to monitor potential developments and adjust to changes with more agility. The key economic terminology and guidelines covered under this unit including economic cycles, stability, growth and inflation. The economic conditions create the context for day-to-day business, ultimately determining how many employees organisations must hire, engage, and develop in order to meet client demand.

Measuring Economy

The term “economy” refers to a variety of interactions that aid in the allocation of physical and human resources to the manufacturing, distribution, and consumption of the various commodities and services that consumers desire or require (De Pascale et al., 2021). The price of products and services or their market value is determined by a combination of the relative demand for these products and services and the comparative supply of the resources required to manufacture them. Adding the market values of all goods produced provides an overall assessment of the economy’s size. The Gross Domestic Product (GDP) is the most often used metric in economics. A market is not the only setting where products, services, and activities of monetary worth can be bought and sold. Assessments of the value of certain non-marketed activities, such as provision of public services, are included in GDP, however other activities, such as the ones that involves caregiving and work done at home, are not quantified in anyway (De Pascale et al., 2021).

The percentage change in gross domestic product (GDP) during a certain period, such as a year or a quarter, is an indicator of economic expansion. This is a critical economic statistic since it indicates the rate at which national income is increasing or decreasing over time. The output level of an economy is limited by consumer demand for goods and services and the availability of resources such as land, capital, energy, and labour. Output levels are also dependent on how effectively these inputs are utilised to create goods and services valued by customers or clients of public services – this is referred to as the economy’s productivity. GDP per hour worked is a critical indicator of labour productivity.

According to economics theory, in order to enhance productivity, organisations should constantly assess their operations to ensure that they can utilize innovative procedure in the implementation of new ideas, technology and software, new sources of labour, and innovative methods of structuring their operations. Increased employee involvement is also necessity for increased productivity.

Economic growth and inflation

There is a limitation to the level of GDP that a nation may attain within a specific timeframe. This is known as potential GDP, and it represents the economy’s ability to supply products and services. Hence, It is likely that if demand for goods and services surpasses potential GDP, there will be upward pressure on prices and costs, which would lead to a rise in the overall rate of inflation. However, if there are significant changes in the commodities that the United Kingdom imports (such as gas), inflation can rise or fall regardless of the balance of demand and supply in the country (Mishchenko et al., 2018).

Potential GDP is determined by a number of factors: The following are some of the factors that determine the potential GDP:

• The amount of work that employees are capable and willing to accomplish, which will be determined by human resource availability.( The population size, the number of people who can or want to work, and the number of hours they work are all factors to consider.).
• The quantity of physical capital (machinery, equipment, computers, etc) that individuals use in their daily lives.
• The level of competence that people employ in their work that empowers them to generate more with each hour of labour.
• The degree of knowledge and technology that increases the quality of physical capital used by employees in their work.
• A set of strategies, including human resource practices and extended team leadership, that enable individuals to generate more in each hour of labour.

Any change in any of these variables will have an impact on potential GDP. Given that there is usually an underlying (Positive) shift in either all or each variable, potential GDP has a tendency to increase over time. This underlying pace at which the economy is changing over time is referred to as the trend rate of economic growth, which is also known as the sustainable growth rate.