Main news sources make the public believe that the US labor market is as strong as it has ever been but if you were to take a close look at the statistics relating to the labor market it shows that it may not be as strong as the media says. A huge crack in the labor market is the unemployment rate, there has been a surge in the amount people that hold two or more jobs in the recent year and because of how the household survey is counted it is very possible that those people that have more than one job can be counted as a separate person per job causing the national unemployment number to be inaccurate. Another problem that has been overlooked regarding the unemployment rate is the amount of full time jobs shrinking by nearly 500,000 in just a three month period. In a recent survey there was a gain in 442,000 jobs, and over half of them were considered part-time jobs.
The Job opening and turnover survey (JOLTS) is a measure on how the labor market is doing and where it stands, JOLTS states that job openings are a key measure on how the market is doing. The issue regarding the statistics with the survey is the job openings are only compared to people that are unemployed and do not consider people who are looking for jobs that currently have one, this shows that the job market may not have as many jobs and there might be more workers than suggested.
Real wage growth is still in the negative due to the high rate of inflation and with the Labor market getting weaker the Fed believes the only way to solve this issue is to put an end to the swell in inflation. If inflation goes down interest will also drop bringing prices down. What this will do for the economy could cause the hiring process to slow down and more workers could eventually be laid off. This could start another economic disaster that could eventually lead to a crisis that was faced similar to covid where a majority of the working population was out of work with no job in sight.
Source:
https://www.ft.com/content/133b7e8b-3c43-48b6-9bb1-ef8a6a3cd44a
While I doubt this could possibly lead to a job crisis as bad as covid it is interesting seeing how differently some interpret the labor market especially with media making it appear that it is stronger than ever before. It's sad to see news making a situation out to be better than it is because it causes people to not be able to do anything at all to work towards solving the problem but with the news lying it makes you need to look into things on your own to see what is really happening
ReplyDeleteI think it is interesting to see that the process of computing the unemployment rate has big flaws. With such flaws, I wonder how the actual unemployment rate compares to the flawed version. There needs to be a rework in these surveys which I do not think would be that hard. With the JOLTS, there just needs to be a couple new questions like are you currently searching for a job even though you currently have one. With a fix in these surveys, the numbers of all the rates will change drastically causing there to be more overall people in the workforce.
ReplyDeleteThe scary thing about our economy right now is that once we fix the big inflation issue, a new issue will arise with the unemployment rate at higher rates. I do think they will rise but I do not think they will be at numbers so high that it will strike disaster.
Right now unemployment rate is currently 3.7%, this is still below the natural unemployment rate. If these numbers are correct and not skewed then it is safe to say that an increase in unemployment wouldn't be extremely unhealthy as the natural unemployment rate of the U.S. flutters between 4 and 6%
ReplyDeleteI like how you highlighted some of the restrictions of how the country measures unemployment as I've been seeing many headlines about the strength of the labor market as you mentioned. It's concerning to think about how the current actions taken by the Fed could eventually lead to severe dips in the labor market.
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