Wednesday, October 16, 2013

Job Market Might Improve, According to Fed

Basically, from what I can gather, according to the Fed (and based on a 6-month moving average), the job market should be modestly improving going forward --- but not so much for those who are older and/or long-term unemployed, but for those first entering the job market, or for those who were unemployed for only a short period. Maybe you can glean some better news than I did in their report. I quoted a few phrases below:

  • "The Great Recession took an enormous toll on the labor market, which has been reflected in the deterioration of many labor market indicators. The pace of labor market improvement has been modest since the end of the recession, and many indicators have not yet returned to their pre-recession levels. Still, the improvements are visible in a broad set of [six] indicators." (Chart below)
  • "This [report] includes information on employment, unemployment, the rate at which people quit existing jobs, the number of people who get hired, employers’ perceptions of the ease of filling their job vacancies, and workers’ sentiment about the state of the overall labor market."
  • "The strength of [economic] recoveries is based on the rate at which people find jobs, which can remain low for some time after layoffs have subsided."
  • "Recent declines in the unemployment rate have coincided with declines in labor force participation."
  • "Labor market recoveries tend to begin with the hiring of workers who are eligible for unemployment insurance and who tend to have longer previous work histories."

The Fed reports an improving job market

Getting the Fed to Explain Itself Better by Jared Bernstein

"People, especially market participants, have come to believe that markets are the Fed’s primary target, if not its sole one, when in fact, it’s the real economy — jobs, inflation, unemployment — that is the ultimate target. Financial markets are by no mean incidental, but especially in downturns, those markets are intermediaries through which Fed actions are intended to help average, working families. The tail does not wag the dog."

Brookings: Okun's Law says we're growing well below our economic potential by George L. Perry:

"The 4.6 percent unemployment rate in the two years preceding the Great Recession are a reasonable estimate of full employment. Unemployment in the second quarter of this year was 3 points higher than that, so the output gap was about 6 percent of GDP, or roughly $800 billion. This measure of today's output gap is quite consistent with estimates of today's employment shortfall that my colleague Gary Burtless recently made using a different methodology. He estimated that employment today is about 5 percent, or 7.4 million jobs, below what it would be at full employment."

Excerpted and edited from a recent post by Paul Krugman (no quotes):

Macroeconomic Advisers has a new report showing that since the GOP takeover of the House, the combined effects of uncertainty in the bond market and cuts in discretionary spending have subtracted 1% from the GDP's annualized rate of growth --- meaning almost 3% of actual GDP --- with losses around $700 billion of wasted economic potential. And the report also estimates that the current unemployment rate is 1.4 points higher than it would have been without those Tea Party/Republican policies (We’d have a U-3 unemployment rate below 6% if not for these wackos).

A side note on those wackos: A little-known far-right movement called Christian Reconstructionism can claim partial responsibility for the government shutdown. Their goal: to eradicate the U.S. government so that a theocratic Christian nation emerges to enforce biblical laws. The key leader of this movement is Gary North from Tyler, Texas. He's a long-time associate of Ron Paul, intellectual godfather of the Tea Party movement.--- Quote of the Day from America the Half Beautiful: "The Mad Hater's Tea Party throws everything overboard, not just the tea. The captain, the crew, the ships dog...pirates could hardly do worse."

Also read Paul Krugman's explanation about The Paradox of Thrift (with quotes):

"For those who don’t know or don’t get the paradox of thrift, it’s actually very simple: if people (or the government) cut their spending, and the Fed can’t offset this move by cutting interest rates, the economy will contract — and the economy’s contraction will reduce the incentive to invest, so that investment actually falls. I know that many economists just refuse to accept this proposition, which seems absurd to them. But what, exactly, is their alternative? If you believe that a cut in spending under current conditions — it doesn’t matter whether it’s public or private spending — leads to more rather than less investment, what is the mechanism? How does my spending cut give businesses a reason to spend more rather than less (other than via the confidence fairy)? Remember, interest rates can’t fall — the zero lower bound isn’t a theory, it’s a fact, and it’s a fact that we’ve been facing for five years now."

My posts on older and long-term unemployed workers:

* If you're not older and long-term unemployed --- enjoy the moment --- because tomorrow you might end up being older and long-term unemployed. A study shows that 1/3 of all US jobs are still prone to offshoring. Will you dodge the bullet? Will you have a chair when the music stops?

1 comment:

  1. The NEW agreement will open the government through Jan. 15, lift the debt ceiling through Feb. 7 and require a "bicameral" budget conference committee by Dec. 13 --- then we can through all this crap all over again while the Tea Party-led Republicans tries to force more concessions from the Democrats (cuts to Social Security (chained-CPI), cuts to Medicaid in Obamacare, cuts to SNAP (food stamps), and all the other cuts and tax breaks the GOP is hoping for.