The economic performance and the labour market performance are interacted with each other. that employers make their hiring decisions based on their expectations about the future economic performance and their market future development, on the other hand, the labour market is also an important factor that could affect the economy. When more people are hired in the labour market, it could lead to an increase in the entire population income.
Therefore, employers have to analyze the factors that cause the economic growth. If they find that the economic growth is mainly driven by an increase in the employment rate, they may slow down their hiring speeds, as such expansion of production (an increase in hiring is a type of expansion of production) may lead to overproduction.
Recently the stock markets (particularly the US and the UK) have achieved their historical peaks; however, many traders and fund managers have been very cautious about the current market situations. This is because the real economic growth has been lagged behind the financial market growth. People expect huge bubbles have been created in the financial market. Bubbles are very likely to be created when the economy is only dependent of very limited economic drivers. When the key driver stops its growth, the economic growth will stop, and all the previous investment based on the expectation of the continuously growing driver will become useless and investors will suffer huge losses. This will create a fear in the market and stop the hot money flow in the economy. This leads to a financial crisis.
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