USING GRANGER CAUSALITY TO EXAMINE THE RELATIONSHIP BETWEEN ECONOMIC GROWTH AND ABSORPTION OF LABOR IN NORTH SUMATERA PROVINCE- INDONESIA

This study refers to Okun's Law on the economy in North Sumatera Province. Difference with previous studies, in this study the data used is not aggregate data but the data of each economic sector. In addition, the unemployment variable is proxy with the absorption of labor rate. The data analysis was tested by Granger Causality to determine the direction of the relationship between variables for growth of each economic sectors and absorption of labor. By using the Granger Causality Test analysis we concluded that the agricultural sector has a two-way direction relationship between economic growth and absorption of labor. Mining and Quarrying sector, construction sector, transport and communication sector and services sector only have one-way direction relationship from absorption of labor to economic growth Electricity, gas and water supply have one-way direction relationship from economic growth to absorption of labor. Three other sectors are sectors manuf{lcturing industry sector; trade, hotel and restaurant sector and finance, real estate and business service have no relationship at all between economic growth and absorption of labor.