The Good News Economist

When all you read is gloom, turn here for a much different perspective.

Saturday, November 28, 2015

Debunking The Negativity of Declining Labor Participation Rates

Many have tried to dilute all the incrediblely improving US economy jobs numbers -- which now show gains of nearly 13,500,000 new private sector jobs since the great recession.  Additionally folks have tried hard to discount the unemployment rate now hovering near 5 percent.  

The only remaining negative mantra continues to be "Declining Labor Participation Rates."  The "logic" goes something like this:  even though the unemployment rate is at 5%, the reason is because many people in the jobs market have "given up hope" and stopped looking for work.  Although you can always find examples of folks who have given up looking, the broad statement does not prove out in the general population.  In fact, the main reason today that folks have stopped looking for work:  THEY FEEL SECURE ENOUGH TO RETIRE!

The labor force participation rate, as defined by the Bureau of Labor Statistics, is “the percentage of the population [16 years and older] that is either employed or unemployed (that is, either working or actively seeking work).”
As the BLS has explained well before the great recession,  Every year after 2000, the rate declined gradually, from 66.8 percent in 2001 to 66.0 percent in 2004 and 2005. According to the BLS projections, the overall participation rate will continue its gradual decrease each decade and reach 60.4 percent in 2050.  Why?  Here are the BLS reasons:

1) The aging of baby boomers. A lower percentage of older Americans choose to work than those who are middle-aged. And so as baby boomers approach retirement age, it lowers the labor force participation rate.
2) A decline in working women. The labor force participation rate for men has been declining since the 1950s. But for a couple decades, a rapid rise in working women more than offset that dip. Women’s labor force participation exploded from nearly 34 percent in 1950 to its peak of 60 percent in 1999. But since then, women’s participation rate has been “displaying a pattern of slow decline.”
3) More young people are going to college. As BLS noted, “Because students are less likely to participate in the labor force, increases in school attendance at the secondary and college levels and, especially, increases in school attendance during the summer, significantly reduce the labor force participation rate of youths.”
So no matter who is president or who controls the congress -- and independent of the health of the economy -- the BLS projected in 2006 that labor force participation rates were going to go down.
Further another report from Shigeru Fujita at the Federal Reserve Bank of Philadelphia on Feb. 6, 2014,  teases out the relative impact of various causes for the declining labor force participation rate. 
However, Fujita concluded, “Almost all of the decline (80 percent) in the participation rate since the first quarter of 2012 is accounted for by the increase in nonparticipation due to retirement. This implies that the decline in the unemployment rate since 2012 is not due to more discouraged workers dropping out of the labor force."  (See page two of the report linked above).
So in fact what has occurred is two-fold... job creation is constant and retirement conditions have improved!
Fujita further concludes:  "The significant rise in retirement in the past three years is clearly related to the retirement of baby boomers. Remember that the first cohort of baby boomers was born in 1946. Importantly, this wave of retirements could have started earlier than three years ago. However, a plausible conjecture is that the 2008 financial crisis and associated loss of wealth might have had the effect of delaying their retirement age, while the subsequent recovery of financial wealth has allowed more of them to retire in the past few years."

Friday, November 6, 2015

US Economy Adds 271,000 Jobs in October; Unemployment Rate Now at 5 Percent!

U.S. employers went on a hiring spree in October, according to government data released Friday morning, adding 271,000 jobs.

The number was far above analysts’ consensus of about 185,000 positions.  The unemployment rate fell to 5 percent, and wages rose at the fastest pace since 2009. 

The robust data provides more evidence that the job market is nearing a full recovery six years after the recession officially ended. The jobless rate peaked at 10 percent in 2009 and is now closing in on what many economists believe to be its lowest sustainable level.

October's jobs increased across a broad swath of industry segments. Administrative and support services added 46,000 workers, and the health care industry added a similar number. Retailers and restaurants added more than 40,000 positions each, while construction employment increased by 31,000.

“At this point, I see the U.S. economy as performing well,” said Fed Chair Janet Yellen on Wednesday during her testimony at the US Capitol.

Remember what we said back in 2008?  It's not so bleak after all!

Saturday, September 5, 2015

59 Straight Months Of Job Gains

The job market continues to get better: After 59 straight months of job gains, this shouldn’t be a controversial statement. 

And job growth has been impressive: The U.S. economy is now adding jobs at a pace of about 3 million per year. The unemployment rate is the lowest it has been since April 2008 and broader measures of underemployment are improving as well.

The U.S. economy added 173,000 jobs in August, pretty much in line with recent trends of about 200K per month.  The unemployment rate fell to 5.1 percent, again a drop that was pretty much in line with recent trends. The rest of the monthly report from the Bureau of Labor Statistics was similar: positive.

And as we've seen before, the jobs gains are not just quantity, but quality.

Monday, August 31, 2015

Good Quality Jobs Are Back! And College Graduates Are First in Line

Georgetown University's Center on Education and the Workforce has dispelled the myth that most of the jobs of this recovery are low paying jobs... their recent study shows just the opposite:

As we all know prior conversations in the media discussed research that suggested that college graduates were stuck filling low-wage jobs. GU's latest report, Good Jobs Are Back: College Graduates Are First in Line, analyzes the growth of the U.S. jobs and wages during the recession and recovery, and shows this earlier research to be misleading. They find that since 2010, the economy has produced 6.6 million employment opportunities, 2.9 million of which are considered good jobs (a term they use for jobs in the upper-third by median wages of occupations in which they are classified). The key findings of the report reveal that 2.8 million of these good jobs went to college graduates. Some of the largest growing professions seek highly-skilled workers and offer large benefit packages. Most good jobs are full time and twice as likely to provide health insurance and retirement plans. Read the full report here to learn more about the growth of good jobs during the recovery.

If you don't have time to read the full report, here is the bottom line: "The Great Recession was a major hit to the U.S. labor market, and the slow pace of economic recovery has left many people apprehensive about embracing any positive news on the jobs front. The prevailing narrative in the early months of the recovery described young people graduating from college and being unable to find positions in their fields of study. They sometimes settled for low-paying, part-time jobs, often in retail and food services industries, because such positions were all they could find. But that is just a small part of the story. The larger picture shows that as the recovery accelerated, more high-quality, good jobs were created, and for the most part, they were filled by highly-skilled professionals with postsecondary education. A more accurate description of the common experience in this jobs recovery is of college graduates finding good jobs with benefits."

Sunday, August 9, 2015

Unemployment rate remains steady at 5.3% as US economy adds 215,000 jobs

The US economy continues to add jobs... The US economy added 215,000 jobs in July, while the unemployment rate remained steady at 5.3%, meeting expectations.

So far this year, job gains have averaged 208,000 a month.  That's about 1.5 million new jobs this year thus far.

“...yet another solid employment report”, said Chris Williamson, chief economist at Markit.

Additionally last week, applications for unemployment benefits increased by a meager 3,000 to about 270,000. The four-week average dropped to 268,250, close to such low levels not seen for nearly 15 years.

Such near-historic lows point to a healthy job market, according to economists. “Initial claims for unemployment insurance have been below 300,000 for 22 straight weeks, the longest such stretch since 1973,” said Gus Faucher, senior economist at PNC Financial Services. “Claims are running at a pace consistent with monthly job growth of better than 200,000.”

This additional report of an increase of more than 200,000 jobs implies a continued downtrend in unemployment, according to Jim O’Sullivan, chief US economist at High Frequency Economics. Such a downtrend would reinforce the Fed’s assessment of the jobs market and recent employment gains as “solid” and get the unemployment rate to within the 5% to 5.2% range that most Fed officials consider to be consistent with "full employment."


Wednesday, December 24, 2014

2014 Economy Finishes Vigorously: Evidence is Overwhelming

Gross domestic product soared 5% on an annual basis in the third quarter -- that according to the US government report on GDP this week. It was icing on the cake for an economy that is now humming along.

To put that in perspective, it is the strongest quarter of growth since 2003.  That's right: the best quarterly growth in 11 years!

"...There is no doubt the economy has been great this year," said Dan Greenhaus, chief global strategist at BTIG LLC.

Others on Wall Street agree and continue to send the stock market to record highs with the Dow index now crossing 18,000 for the first time ever.

Growth came from all major segments with business investment, consumer spending, housing, exports and government spending all showing signs of robust strength in this week's report.

All of those healthy reports explain why hiring has increased dramatically this year. Employers added 321,000 jobs in November, making 2014 the strongest year for job growth since 1999.  Again -- underscore this and make no mistake: this year has been the best year for job growth in 15 years!

Finally...for the first time in seven years, more than half of Americans think the economy is in good shape, according to a new CNN/ORC poll released on Tuesday. That marks a big improvement from October when just 38% of Americans said economic conditions were somewhat or very good.

Happy, Happy Holidays!


Thursday, October 30, 2014

U.S. economy grew at 3.5 percent in 3rd quarter

The U.S. economy grew at a very solid annual rate of 3.5 percent in the July-September quarter, propelled by solid gains in business investment, export sales and the biggest jump in military spending in five years.

The Commerce Department says that the third quarter result followed a 4.6 percent rebound in the second quarter of 2014. 

Saturday, July 5, 2014

All Job Losses During The Great Recession Have Been Erased

It has been way too long since my last post.  Sorry folks!  But these numbers -- many just published by -- are well worth passing on to everyone:

§  All job losses during the great recession have been erased.
§  In June the economy added 200,000+ jobs for the fifth month in a row -- 288,000 in June alone.  The five month streak is the longest since the late 1990s.
§  The Unemployment rate is now at 6.1% -- you may remember that the unemployment rate was at 10.1% at the height of the great recession.
§  Corporate profits and stock prices continue to set record highs.
§  The number of food-stamp recipients has retreated from the record high of 2012; fewer beneficiaries have been added under Obama than were added under George W. Bush.
§  Under Obama, federal spending has risen more slowly than the rate of inflation. 
§  Auto sales -- a consistently bright spot in the recovery -- heated up even more in June. They clocked in at 17 million at an annualized rate for the best month in eight years.
§  Gallup polling found that 45 percent of Americans were working full-time in June, one of the highest rates since the polling company began tracking the figure. 
§  The government data released Thursday mirrored those results, with the employment-to-population ratio rising to 59 percent, the highest level since 2009.

Friday, December 6, 2013

Unemployment falls to 7%

The United States lost 8.7 million jobs in the aftermath of the financial crisis. As of November, it had gained about 7.4 million of those jobs back.

Saturday, August 31, 2013

GDP Growth Better Than Earlier Believed

Real GDP growth for the second quarter was raised to an annualized rate of 2.5 percent compared to the initial estimate of 1.7 percent and compared to a fourth quarter rise of 1.1 percent. Expectations were for 2.2 percent.

The upward revision to GDP growth was mainly due to a sharp upward revision to net exports. Also, there were improvements to inventories and nonresidential structures investment.

Comparisons to the first quarter of the year showed that the increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures, exports, private inventory investment, nonresidential fixed investment, and residential fixed investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

Headline inflation rates when annualized remain quite tame.

Monday, January 28, 2013

Durable Goods Orders Surprise Everyone

Manufacturing momentum is accelerating again. While civilian aircraft added huge lift to December durable goods orders, the gains were broad based. New factory orders for durable goods in December jumped a whopping monthly 4.6 percent, following a boost of 0.7 percent in November. 

The market forecast was for only a 1.6 percent increase. The transportation component on the index spiked 11.9 percent. Excluding transportation, durable goods orders increased 1.3 percent, following a rise of 1.2 percent in November. The consensus called for a 0.4 percent rise in orders excluding transportation.

Outside of transportation, the index increases were led by primarily metals, up 3.6 percent, and computers & electronics, up 3.3 percent. Also rising were fabricated metals and machinery.

Thursday, January 17, 2013

Initial Jobless Claims Plunge

Initial unemployment claims in the January 12 week plunged 37,000 to 335,000 for a recovery low and massively below anybody's expectations.  The consensus predicted for the week had been 368,000. There are no unusual factors skewing the latest data although some seasonal adjustments may play a role.

The four-week average is down 6,750 to 359,250 which is about 10,000 below the mid-December level.

Improvement continues in the jobs market, and this report continues to point to a longer term trend leading to more robust jobs growth this year.

Friday, January 4, 2013

Jobs Grow For 34 Straight Months

Today’s report from the Bureau of Labor Statistics (BLS) shows that private sector businesses added 168,000 jobs in December. Total non-farm payroll employment rose by 155,000 jobs last month. The economy has now added private sector jobs for 34 straight months, and a total of 5.8 million jobs have been added over that period, taking account of the preliminary benchmark revision. In 2012, private businesses added two million payroll jobs, taking account of the preliminary benchmark revision.

Wednesday, January 2, 2013

US Stocks Follow the World New Year Rally Thanks to DC

The US stock market rallied on Wednesday - the first day of the trading new year. Gains were broad. Financial shares and tech stocks fared exceptionally well. The US rally followed a broad world stock surge that begin as lawmakers finalized voting late Tuesday evening in Washington DC. Investors were cheering that late year deal which keeps tax cuts in place for most Americans but raises the tax rate on individuals earning more than $400,000 a year and married couples earning over $450,000 a year. Lawmakers in DC also extended federal emergency unemployment insurance benefits for another year as the jobs marketing continues to improve.

Thursday, December 20, 2012

GDP Gets Notable Upgrade

For its final estimate for the third quarter, GDP got a notable upgrade. Real GDP growth for the third quarter was revised up to 3.1 percent annualized, compared to the second estimate of 2.7 percent annualized and to the advance estimate of 2.0 percent.

The latest number easily topped market expectations for a 2.8 percent advance.

 Demand figures also got a boost. Final sales of domestic product increased 2.4 percent versus the second estimate of 1.9 percent and second quarter growth of 1.7 percent. Final sales to domestic producers (which exclude net exports) were revised to 1.9 percent, compared to the second estimate of 1.7 percent and compared the prior quarter's 1.4 percent.

Saturday, December 8, 2012

Unemployment rate falls to lowest level since 2008

The U.S. economy added 146,000 jobs in November, and the unemployment rate fell to 7.7% from 7.9% in October, the Labor Department said. That's the lowest unemployment rate since December 2008. "Our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November," the Labor Department said in a press release.

Wednesday, December 5, 2012

Stocks: Lots of Room to Run

Stocks have lots of room to run, said Goldman Sachs senior investment strategist Abby Joseph Cohen at the Bloomberg Hedge Fund conference in New York Wednesday morning. Cohen, a 22 year veteran of Goldman Sachs, estimates that even after the 2012 market rally, stocks could rise another 10% to 15% in 2013. While Congress has given the U.S. population reason to worry about taxes and the fiscal cliff, the overall fundamentals of the U.S. economy are healthy, and consumers have money to spend, Cohen said. Moreover, the U.S. has been reducing its debt relative to its growth domestic product during the past few years. She noted that debt was 4% of GDP for the fiscal year that started in October compared to an 11% ratio in 2008. "We are slowly growing our way out of the most extreme version of the debt crisis," she said.

Tuesday, December 4, 2012

November A Solid Month For Manufacturers

November was a solid month for the nation's manufacturers based on the PMI index from Markit Economics which shows a final reading of 52.8, up four tenths from the flash reading and up a sharp 1.8 points from October. Very encouraging is a good description for the details which show accelerating monthly growth for new orders and for output. New exports orders show their first monthly increase since May. Backlog orders are in the plus column for the first time since August. Employment growth is steady and respectable.

Tuesday, November 27, 2012

Consumer Confidence Increases Again

The Conference Board Consumer Confidence Index, which had increased in October, also posted a moderate increase in November. The Index now stands at 73.7, up from 73.1 in October. The Expectations Index rose to 85.1 from 84.0 last month. The monthly Consumer Confidence Survey, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics. The survey is conducted around what consumers buy and watch. Lynn Franco, the Director of Economic Indicators at The Conference Board: “The Consumer Confidence Index increased in November and is now at its highest level in more than four and a half years (76.4 Feb. 2008). This month’s moderate improvement was the result of an uptick in expectations. Over the past few months, consumers have grown increasingly more upbeat about the current and expected state of the job market, and this turnaround in sentiment is helping to boost confidence.”

Monday, November 26, 2012

Texas Future Outlook Remains Positive

Texas factory activity was little changed in November but the outlook slipped. The production index, a key measure of state manufacturing conditions, came in at 1.7, indicating output barely increased from October. Other survey measures suggested flat manufacturing activity in November. The new orders index came in at 0.4, suggesting that demand was unchanged from October. Perceptions of broader business conditions worsened in November. The general business activity index fell to minus 2.8 from plus 1.8 in October, returning to negative territory. The company outlook index moved down to minus 4.8 in November from plus 2.4 in October, registering its first negative reading since April. Labor market indicators were mixed. The employment index edged up to 6.7 in November, with more than 20 percent of firms reporting hiring compared with 15 percent reporting layoffs. The hours worked index dipped from minus 5.9 to minus 7.1. Indexes reflecting future business conditions fell sharply in November. The index of future general business activity plunged from 16.8 to minus 5.3, its lowest reading in four months. The index of future company outlook dropped from 20.9 to 1.8. Indexes for future manufacturing activity also fell this month but remained positive.

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