Summary: Following up yesterday’s post (the good news is that the bad news about the economy is wrong), we have a cheerful view of the economy.
A Brighter Outlook for America’s Unemployed
by John Ridlehoover of the VA Home Loan Centers
Over the last several years, the unemployment rate in the United States has been in a state of flux. In 2008, the United States saw a low unemployment rate of only 4.7%. After the collapse of Wall Street and the U.S. housing bubble burst in 2009, the unemployment rate had grown to around 10.1%. In 2010, the number of unemployed Americans was roughly around 6.8 million, which was the peak of unemployment.
A large unemployment rate puts a halt on the economy of a country as a whole. The more unemployed citizens mean the less consumer spending there will be. Consumer spending and the building of new businesses are keys to growing an economy.
During the first few months of the year, the economy fell 0.7%. Economists believe this drop to be caused by the extreme winter we had this year. The winter weather caused everything to slow down, including US ports.
Though America has seen dark times as far as unemployment, May and June of 2015 have shown strong job growth in some time. With over 470,000 jobs created, the number of unemployed citizens fell from close to 7 million to 2.5 million. Chief economist at Bank of the West in San Francisco, Scott Anderson, has said about the current job market, “Job growth roared back to life in May.”
Many of the new jobs come from healthcare, hospitality, and construction companies. There has been a rising demand for new homes, which explains the growth of jobs in the construction industry. Another industry that has seen large job growth is manufacturing, which was caused by the high demand for automobiles. In fact, May has shown the highest demand for vehicles since July 2005.
So far, over 3 million Americans have rejoined the workforce. Not only that, the number of American citizens applying for unemployment benefits has greatly decreased. The number has remained under 300,000 for months, which is the lowest it has been in years.
Not only has there been a large growth in jobs, but there has also been a notable increase in job wages. US wages have grown by 0.3% . Notably, the minimum wage increased in several states. Recently, the Labor Department has proposed to increase the federal threshold of wages paid to employees that work overtime. The current threshold is “time-and-a-half” for workers that work more than 40 hours per week. Even with the inflation of the 1970s, the threshold was not changed to keep pace. News of the outcome of this proposal should be unveiled within the next few days.
Economists are optimistic about the economy, expecting it to grow around 2.5% this year.
Forecasts of US GDP
The Atlanta’s Fed’s GDPnow model and the Blue Chip Economists as of July 7…
About the author
John Ridlehoover has a Bachelor’s Degree in Professional Writing, and has published at several magazines and websites.
About the VA Home Loan Centers
VA Home Loan Centers is a company that helps veterans, active duty, and their family members obtain their VA home loan benefits. If you or someone you know is interested in applying for a home loan, find out more information at their website.
For More Information
If you liked this post, like us on Facebook and follow us on Twitter. See all posts about economics, and especially these about the state of the economy:
- Dreams of a boom fade & attention turns to secular stagnation.
- Economic status report: good news plus chaff from doomsters.
- What does our surprisingly slow economy in Q1 tell us about the future?
- About our slowing GDP: are we near a recession? are the models accurate?
- A secret of the new business cycle, & why good predictions have become so rare.
- Put the latest stats in larger context to understand the economy.
The author paints a pretty picture but fails to note that largest reason the unemployment rate dropped was that millions of people were dropped from the official workforce. That gaping hole in their description of current labor force conditions does not inspire confidence in the rest of the story.
On the other hand, working solely from the perspective of a single person who has not travelled very much the last couple of years, things are surprisingly good for the average worker’s disposable income considering the drop in the workforce numbers combined with stagnant hours, wages that barely keep up with inflation and falling productivity. There is a positive force at work that I do not yet understand (which is better than the alternative).
Being me, I fear that it is some sort of bubble or credit borrowing that is not sustainable but I have no basis in fact on which to hang my fears.
Pluto,
“largest reason the unemployment rate dropped was that millions of people were dropped from the official workforce.”
That is not correct. Yes, the headline U-3 unemployment rate does not include people people marginally attached to the labor force” (such as “discouraged workers”). But that’s just one of the 6 measures of unemployment that BLS publishes. The U-5 rate does include them — and that has steadily fallen. It’s now 6.6%. See the graph:
As for the basis of this recovery — it’s not credit growth. Private sector credit remains relatively low overall (there are always weak spots, today being junk corporate debt, college and car loans). Government debt is within safe limits. There are other problems, often described here. People tend to look for problems that caused problems in the past — especially the past one or two cycles (the recency effect). In fact problems seldom repeat over such short time horizons. New problems occur.
Now a question for you: where else on the internet would you get this level of response to a comment?
FM, as you should know by now, I deeply respect the level of information at your website, which is why I keep coming back.
I think we are talking past each other, probably my fault for using words that did not clearly convey my meaning. I was attempting to point out that workforce participation is much lower than it was in 2006. The official statistics, quite correctly, do not include these people as they have truly dropped out of the workforce.
But this means that they are not earning paychecks and since wages per hour and hours worked per week have stayed more or less static, the overall national paycheck is smaller than it was in 2006 in spite of a lot of people getting new jobs (although a lot of those jobs pay less than the jobs those people held in 2006).
The nation seems to have adjusted better to this than I expected but reports of years of record auto sales and booming times at the malls (at least during the holiday season) leave me wondering how this adjustment occurred and what parts of the retail economy shrank and why.
Pluto,
Yes, you are correct about the people dropping out of the workforce. But this is very wrong…
“The official statistics, quite correctly, do not include these people as they have truly dropped out of the workforce.”
That’s Zombie economics (believed no matter how often disproven), and a staple of Zero Hedge (along with the belief that the government provides auto loans, and other nonsense). They are called marginally attached workers (including discouraged workers), and they are counted. (there are few after 12 months, since they must have another source of income as an alternative to work, hence not workers). The graph I showed you was the U-5 unemployment rate, which includes them in the numerator (as unemployed) and denonimator (in the labor force).
You guys keep dwelling in the stupidity of how many “jobs” or “jobless claims” came this month, quarter or year.
How about coming clean and admitting it is all a joke, and that the joke is on the 99% of “Americans” no matter how many “jobs” or “jobless claims”?
Normandy,
Those sound like the words of someone who has never know extended unemployment and its effects: foreclosure on your home, poverty, divorce, and illness. Try looking around youself more carefully.
Unemployment has consecuences, Im sure of that,
and do not rejoyce in the suffering of anyone.
People would not fall into the the debt trap if it were not for women,
they would not forclose on the home they wouldnt buy,
would not divorce since they would not marry to begin with.
Am I clear?
Most disgraces in a man’s life come from associating with women,
any grown man knows this but doesnt make it explicit for his own reputational safety.
Let me put it this way Editor,
If American women were a foreign country
and American men were America…..
America would be nuking whatever that country would be,
but as it is you keep being their slaves.
go figure
Questions pointed at the article
Is the brighter outlook that young Americans will find shitty jobs if they want them?
Is a shitty job better than no job? Based on what?
If we take a neoliberal perspective, wouldnt it be better to have more people
unemployed so as to make them compete for scraps?
Isnt people competing for “nice jobs” competing for the upper scraps?
Reform or Reformation?
“and your women never reject pork.”
I meant young women, not your women
FM Editor:
In one of your response posts you said:
“Government debt is within safe limits.”
This was a mis-print right?
Greg,
Despite what you read at Zero Hedge, the US debt load is easily managed. Public debt is $13.097T; GDP is ~$18T = debt/GDP of ~72%. Developed nations have withstood debt/GDP levels of twice that for brief times, and loads of 100% for extended periods. To use the quite bogus household analogy, almost every American middle class household that buys a house has a debt/income level of 2x or more.
The multi-zillion dollar liabilities (future obligations) with which the Right scares the economically unsophisticated are largely from health care, resulting from our mad system that generates a massive income transfer to that sector. Other developed nations get equivalent health care results while spending 1/3 to 1/2 as much. Eventually so will we.
Greg,
What would make me happy (and surprised) is if you would look at the facts I’ve shown and acknowledge one of them.
When I started this project in 2003 I thought that the discussions about be about values (torture good?), visions of the past (US force for good or evil) and future (peak oil in 2005 or 2025 or 2125?). 40 thousand comments later — a substantial database — show that they’ve been largely about facts, and the majority of those about look up in Britannica kind of facts. This is distressing, hence my posts about our inability to see the world clearly.
It would be nice to have one person show that there is hope. I doubt I have had more than ten people doing so among the 40000 comments.
FM Editor
First of all the fact that I read your website is proof that I value your commentary. It is excellent. That’s why I come back.
I am not a cheerleader for Zero Hedge. I keep track of probably 20 web sites on a daily basis. ZH is only one.
You are correct that anyone who reads ZH uncritically and actually tries to trade based on what it says will be sadly disappointed.
My opinion is that its commentary, if understood on a long term basis, will be beneficial.
And I find its commentary entertaining. I don’t (and no one should) trade on what they say.
Some general things I agree with:
Example #1
The days of dollar dominance are numbered. Talk to me in 2025 (maybe sooner?) and we will evaluate the status of the worlds reserve currency.
Example #2
Gold & silver in 10 years? Much higher IMO. I can invest and wait.
Example #3 (more short term)
I know you think it is silly but I don’t think the fed can raise rates this year because the economy and state of the world doesn’t warrant it. Janet Yellen is full of shit when she says she might. And if she does raise rates it will not bode well. I have money on this and if I am wrong well so be it.
To end on a positive note, keep up the good work.
Sorry one last thing…
I also agree that the markets are being manipulated by the central banks. ZH points this out quite often.
That would be my last example.
Greg,
The Fed says it is manipulating interest rates, and to a lesser extent the currency and credit markets. So giving credit for that to ZH is nuts.
ZH retails nutty conspiracy theories about the Fed manipulating other things, without giving the slightest evidence. You obviously have bought their stories, yet another of the unfounded things you believe.
I have had thousands of these these conversations with people believing faux economics and faux history. They are immune to facts, while telling me how many websites they read.
These conversations are a waste of time.
Greg,
“In 2025”
If you think you can accurately predict conditions in 2025, congrats on your self-confidence. The advantage of such predictions is neither you nor anyone else is likely to remember them. Decadal predictions about geopolitics and economics are usually wrong.
Almost all of your descriptions so far about the content on this website have been wrong; many are 100% wrong. If you are in fact reading this, I hope you are entertained. It looks like you are learning nothing.
I suggest you trim your reading down to 5 (10 max) sources, chosen for reliability. I suspect that would give you a clearer picture than you have today (which seems quite confused), and save time for more useful pursuits.
Good economic analysis is boring. As they say about The Economist, any article can be either interesting or accurate — but not both.
“I know you think it is silly but I don’t think the fed can raise rates this year because”
Yep, backwards again. I have said since 2010 that the U.S. economy was stuck in stall speed. No “take off”, no return to normal. Any substantial shock (.i,e raising rates) would pitch us into recession. I have written dozens of posts about this.
That is far more accurate than the dozen or so predictions at ZH of an imminent recession.
ZH Editor
You don’t take compliments very well. Maybe you didn’t read my whole comment about why I like FM and read it.
In any case here is an example of why I like ZH.
From a recent headline:
“July 5: Greek Independence Day; July 15: Greek In Dependence Day”
This is clever don’t you think?
Greg,
I am uninterested in complements. I would regard it as more meaningful if you could accurately describe something you read here, suggesting that I have not wasted my time.
If you are reading ZH as a clown show, that is odd but sorta reasonable. However your comments show that you believe much of what you read there, suggesting that ZH is having the last laugh.
As I have said so often, the U.S. outer party wants propos. All propos, all the time. So the 1% is having the real last laugh.
ZH Editor
You are quite harsh in your replies to my comments. I hope I don’t come off that way when I write back. I am really not trying to be antagonistic.
I am not trying to eviscerate your point of view but just have a conversation. You respond like it is life or death to get your point across.
I know I shouldn’t ask the next question but I will anyway…..
You say I read too many web sites? Which of the following should I cut out?
WSJ
Kitco
Yahoo finance
Ny times
UK Guardian
Drudge report
Huff post
Zero hedge
UK Mail
Russia today
Fabius Maximus
Peak prosperity
Mises institute
Ben swann
The daily caller
Project censored
Bloomberg
Forbes
Stockmans contra corner
Pragmatic capitalism
Greg,
These conversations are my only way to determine if there is any point to this project, and also give a deep window into how people think. The results are depressing, but are one reason for my successful forecasting record.
As for your sources, it is a matter of personal preference. There is no magic touchstone of value. But I’d bet big that you could cut several and have more time for life and you would be better informed: Kitco, Forbes, ZH, yahoo finance, and peak prosperity.
Probably cut the FM website, too. Can you name anything you learned here? Almost everything you have mentioned mis-states what you have read here, so it is obviously not working for you. My guess is that material here conflicts with what you see from your fringe sources, so you can’t absorb it.
Find other ways to have fun. Entertaining economics are almost always wrong. This might be the best advice you get this year. Certainly the cheapest.
Greg,
“You are quite harsh in your replies to my comments.”
It’s a difference of perspective. You appear concerned with tone. I’m concerned with truth. We’re in trouble, and only with clear vision do we have any chance at all of success.
“I am really not trying to be antagonistic.”
Certainly not. The opposite, in fact.