Over the last week labor markets improved and the number of
Americans filing new claims for unemployment benefits has gone down. But the
cold weather should continue to damage the economy and keep it slow. The
weather has caused many people to miss work, which held back payroll growth in
February. Along with the hurting payroll growth, the snowstorms and cold
weather have caused growth in electricity and heating fuel prices this past
January in households. The gains in household energy had accounted for most of
the .1 percent increase in its CPI.
Because of the frigid temperatures the electricity prices rose 1.8
percent, natural gas prices up 3.6 percent, and the cost of heating oil rose
3.7 percent. These are some of the
biggest increases in a while and could continue to change if the temperature
stays cold. Overall inflation remained contained and CPI rose .1 percent for
the second month in a row.
http://www.nytimes.com/2014/02/21/business/economy/unemployment-filings-decline-signaling-steady-job-gains.html?ref=economy&_r=0
It is likely that the unemployment rate is only decreasing, since more people are leaving the labor force. In 2007, the labor force participation rate was 66%. Currently, the labor force participation rate is 62.8%, which is as low as the labor force participation rate in 1977. Although it looks good that less people are filling out applications for unemployment benefits, this could mostly be happening due to more people not qualifying for unemployment benefits as more people leave the labor force.
ReplyDeleteI agree with Matt here. While it is certainly possible that people stopped filing for unemployment due to finding jobs, it is also likely that people became discouraged and stopped looking for jobs, thus leaving the labor force and no longer being eligible for unemployment benefits.
ReplyDeleteHowever, this is a good point regarding the cold weather. Temperatures have been bitter cold in many places, including in the South, where snow has fallen. These extreme weather conditions have caused some work places to close on multiple occasions, leading to many not earning as much last month. However, costs of heating had risen, meaning there would be less money for consumers to spend elsewhere, This would hinder growth of GDP more. Hopefully, though, once the temperatures warm up for good, people will have more income and more money to spend, allowing for GDP to continue growing as the US economy recovers.
Yes, this is like what we talked about in class... just because there are less people seeking unemployment benefits, doesn't mean that there are fewer people unemployed. This could be due to participants no longer in the labor force because they are discouraged.
ReplyDeleteI agree, I think that the weather does play a part in the economy and that it does hinder growth in the economy.