The Deception of the Current Economy

Today, Bloomberg reported on a subject that I managed to recently discuss in last week's journal entries.  Goldman Sachs has recently stated their disbelief on the attractive drop in the unemployment rate and rise in manufacturing in the US.  While they may seem as if a turnaround is approaching the economy, economists from Goldman Sachs are thinking differently.

There has been a drop in the unemployment rate by 0.4% in the past two months, pushing optimistic viewpoints by many.  However, senior economist Andrew Tilton states that seasonality has an effect on the levels of unemployment.  The strategy once used by Goldman Sachs to correct for seasonality has been thrown in a bit of a loop since 2009 after Lehman Brothers Holdings Inc.'s collapsed model.

The growth that has been seen in the last couple months come in similar locations as my previous entry discussing job growth within the state of South Carolina.  While this article discusses the country as a whole, the argument for what sustainable jobs remains present.  With the manufacturing industry increasing the number of jobs, the positions that will be made available may not fill the long term goals that are needed to keep unemployment down.  As stated in the article, seasonal adjustments are made to avoid viewing jobs that are held either high during the summer or during the holiday seasons.  If the growth in the manufacturing industry turns out to be sustainable, this could potentially be great for America, but the economists interviewed by Bloomberg are highly skeptical.

The need to forecast the unemployment rates and growth of specific industries allows economists and investors insight into what to expect for the future.  Understating or being slightly pessimistic may be an optimal choice for  many economists, as backlash usually occurs by those who boldly predict massive growth, only to fall flat on the ground.  Also, the need to accurately portray what is likely to occur is crucial in rebuilding what I believe has been a broken pact between economists and the general public in the United States.  The recession still stings for nearly all Americans, and the greed that many financial institutions have been accused of are primary sources to the mess we all experienced.  Understanding where to fix these problems and how to ethically handle these positions is important in growing as a budding economist.  it should be interesting to see what will occur to job growth this next quarter.

References:

1. Willis, Bob. "Goldman Sachs Says U.S. Performance May Appear Better Than It Is: Economy". Bloomberg. http://www.bloomberg.com/news/2012-01-23/goldman-sachs-says-u-s-performance-may-appear-better-than-it-is-economy.html