As
we see growth in the US job market, we can only hope that we begin to see growth
in the retail market as well. Reuters
reports that currently, the United States economy hasn’t quite built up to the
proper level of retail sales since the growth of the economy has started to
climb back over the past months. Stella
Dawson insists that because retail is responsible for 2/3 of the economic
activity in the US, the stability of the economy will eventually rely on
consumers continuing to buy products.
Dawson
points out that not only has the job market improved, but more people are
starting to buy cars in 2012. As
historical data can explain, people choose to save more during tougher
times. In the past few months, more
Americans are feeling confident with the state of the economy. In the next few months, it would be safe to
bet that people are going to continue to trust more in the economy.
The Personal Savings Rate in the United States shows that people are saving less of their money as the US has started to climb out of the Great Recession. Hopefully this is a sign that the tougher times are behind us.
The
growth in the United States economy has come at a time when most of the other
major countries are struggling. China
has forecasted slower growth in the GDP.
Europe is still dealing with the constant threat of default by
Greece. But among all of this, the US
still has a chance to benefit and bounce back.
The past month has been filled with
questions on the growth of the manufacturing industry in the United
States. First, corporations were making
claims to bring back manufacturing. Many
economists didn’t buy this. Then, the
reports were released of the 50,000 jobs added in January. Now, more talk by large corporations claim
they plan to bring more jobs back to America. (Reuters)
CEOs from Boeing and GE told Reuters
that they have witnessed overexpansion within the global economy, and the competitive
labor costs in the United States matched with the required technology costs has
allowed for plenty of growth in the future for the American economy.
A completely separate point was made
by the Manufacturing Institute and Deloitte: 600,000 jobs exist, however, the
supply of skilled workers to fill the positions is lacking. Executives claim to be looking for students
educated in the fields of science, math, technologies, and engineering.
The statement makes me wonder the truth
about the barriers to hiring for the machinists positions. Tons of students are coming out of four year
universities, and I believe that the difficulty doesn’t come from the lack of
qualified job seekers, but the difficulty in matching these candidates to the
specific job position.
A prime example for skill matching
can be seen on the campus of the University of Oregon. There is a willingness to pay that many
Oregonians feel is far too high when it comes to leaving the state of
Oregon. While there may be positions outside
of the state of Oregon, students fresh out of college still want to seek
positions in Portland.
Another problem comes into play is
the idea of working in a manufacturing position. The requirements would surely require one to
be working long hours in a factory, and from my personal experiences, the
current generation has formed quite a bias towards this work. With videos and educational reports over the
years telling us of the terrible conditions found in factories, whether it is
the accidents or the strain that these positions may place on a person, the
costs do not outweigh the salary and employment.
I believe that if these problems can
be solved, there is a small amount of growth that can be seen the manufacturing
industry in the United States, and the currently vacant slots will be filled up
once the proper candidates are matched with the positions. But as I have stated in the past, the
uncertainty towards corporations striving for cheaper variable costs will
always exist, and the long term sustainability in manufacturing will surely be
tested.
On Thursday, Simon Johnson expressed his beliefs on the state of
unemployment in the United State. Johnson looks at the potential ruling by
(what Johnson states) House Republicans to cut unemployment benefits by 40
weeks-worth of the current budget. The matter of the fact is that this
cut in unemployment benefits would be extremely detrimental to so many
Americans.
As of right now, we have been hovering around the 10%
unemployment rate. What we are taught in an intro macroeconomics course
is that this number hides many factors that would bloat the unemployment rate
numbers. Underemployment is excluded from the true value of the unemployment
rate.
While these people may have jobs, the hours that are necessary for
them to be content is not being reached. Also, people who have been
outside of the workforce and no longer qualify as unemployed are still
unemployed, yet these numbers are not calculated to the proper unemployment
rate percentage. Johnson states that 16.9% of the workforce is currently
in these positions similar to the counted unemployment. Disgruntled
employees and unemployed people who are discounted create a serious flaw to how
America’s economy is currently running.
On average, the level of long
term unemployment usually stands at 10-15% of the total unemployment rate.
In 2008, this number skyrocketed to 45%. The job market may
be improving, but a question must be asked whether we are gathering people who are
desperately in need of work (the 45%) and putting them into a position for
success. The cycle seems to be playing against this group.
The positive note to this is that our economy has
seen job creation over the past quarter. With that, there is less need to
provide unemployment benefits. However, the economy is not coming back as
fast as the amount of benefits needed are coming in. In fact, the current
position (when including those who should potentially be included in the UR)
brings back memories to the 1930’s.
The biggest problem we seem to be overlooking is that
we can’t just have the upper portion of Americans basking in the rewards of an
improving economy. Balance is what will create a sustainable economy.
I have written over the past weeks over and over again that government
officials continue to push for corporate tax cuts, education tax cuts, and now
unemployment benefits cuts, but what we would like to see is improvement at all
levels of our country. I hope that I have been clear through my posts
that I don’t hate the essence of capitalism, but more so the place where it
currently stands at the moment, and the long term effects it may have on our
economy.
While Johnson argues the mean spirit that the
unemployment benefits cuts imply, I am not so sure I would accept this. I
think many people think entirely rationally, and therefore pursue their own self-interests
and personal gain. But eventually, there comes a point where the costs
placed on society ultimately outweigh the benefits of the few.
Super
Bowl Sunday is a holiday in America, and with that, comes tons of presents
thrown our way: new commercials! While
many of the commercials were silly, or played off the most recent trends in pop
culture to date, other commercials attempted a more serious edge. The one that caught America’s and my own eyes
in particular was the Chrysler “It’s Halftime America”, featuring Clint
Eastwood. The commercial is commentated
by Eastwood to tell the same tale of Detroit’s struggles through the Great
Recession, and how Detroit along with all of America is ready to push forward and
“play the second half” (a.k.a. bring the economy back to what it should
be). Check it out:
As I watched this commercial, I
believed the greatness of the marketing that Chrysler has managed to capture in
recent years during Super Bowls, but as a budding economist, I am skeptical of
the tale Eastwood speaks.
Let’s
first look applaud the tremendous decrease in the unemployment rate in the
Detroit Region. As you can see below, the
unemployment rate once reached as high as 16.6% in July 2009, and now stands
around 9.6% (Bloomberg). The numbers are
truly incredible, and for that, I will state I never imagined Detroit would
return to a level hovering around the average national unemployment rate.
All seems to be heading in the right direction, but could the drop in the unemployment rate in Detroit and surrounding areas be too good to
be true?
But
a bigger question needs to be asked: what caused the improvement in the Detroit
economy? Well, surely we can look at whom
else but Chrysler, the company responsible for such a powerful ad at America’s
largest sporting event. What the
commercial proclaims is that Detroit is now up and running thanks to the power
of manufacturing in the Motor City.
After looking at the statistics over recent months, I was hardly
impressed by the standards being set by the large corporation.
The
manufacturing employment has certainly gone up in the past year, but the growth
rate just doesn’t seem to reach the acclaimed values Chrysler holds for the
Motor City.
While
we can see from FRED that the manufacturing employment in the Detroit area has
increased since the plummet over the past decade, the growth level is nowhere
near what it should be to see a significant effect that could turn Detroit into
the once booming metropolis. In fact, I
would argue that Detroit will never get to this point again.
What
I mainly want to point out was the data found in the US Census Bureau last
March. Over the past decade, 25% of
Detroit’s population left the Motor City.
At 713,777, the population was the lowest since the 1910 census (CNN). As stated above, the peak of unemployment in
Detroit occurred around July 2009. Since
then, there has been a consistent drop in the unemployment rate.
After
seeing the marginal growth in manufacturing employment, I believe the main
cause for the drop in unemployment is heavily skewed by people moving away from
Detroit, especially in the last couple years, and a high amount of people who
dropped out of the unemployment rate candidacy.
The
city of Detroit has been in an uphill battle for over a decade. Due to poor job growth, the dying
manufacturing industry, and many poor policy decisions (that can be discussed
on another day), Detroit is still beaten up and bruised far beyond a
multi-million commercial can explain.
Perhaps
Clint Eastwood has me pinned. I haven’t
seen the Motor City that he knows and sees.
But the truth is that the growth just isn’t there for Detroit and the
manufacturing industry in America. The
bounce back, while noticeable, isn’t showing signs to bring the once flourishing
economy back to the Motor City.
For
those ready to see some touchdowns scored in the second half of the game this
year, please don’t be too disappointed, Madonna and Cee-Lo are still lip-synching
on stage.
While the United States has seen
relative growth as of recently, there are many countries, especially in the
European Union, that are getting destroyed by the Euro crisis. Spain is
one of the countries topping the list of struggling economies.
BBC UK reports the final quarter of
2011 marked 5.3 million unemployed Spaniards, a growth from 4.9 million in
quarter 3 of 2011. This number is especially scary, as 5.3 million
accounts for a 22.8% unemployment rate, more than double the average
unemployment rate in the eurozone. With such a high unemployment rate,
the Spanish government is desperately trying to find ways to cut the budget and
raise taxes in the upcoming year, but will expect a 1.5% shrink in the economy.
The
Spanish Unemployment Rate Dating Back to Around 2005. Since the housing
bubble in 2008, Spain has struggled with job growth.
With
the unstable European economy as it stands, something has to be initiated to
regain investor trust into eurozone countries. The European Union (and
the global economy) will find it near impossible to bail out Spain, and a
default would be extremely damaging to the global economy.
If we
were to see a 22.8% unemployment rate in the United States, there would likely
be riots through every city across the country. The citizens who are
taking the hardest hit in the Spanish economy are the youth. BBC reports
that there is a 48.6% unemployment rate for the ages 18-24. This is
extremely troublesome, as the best hope to build the economy is going to be
with new blood and different economic thought to promote growth.
With
Spain’s unemployment rate, I wonder what effect on emigration within the EU
will happen over the next year. What I could imagine occurring would be
many of the young adults moving to countries with more attractive positions
available. This is not an uncommon notion, especially with the ability to
travel between EU countries relatively easy.
Over
the last year or two, there have been articles discussing the emigration of
Irish after the bail out. Ireland has experienced two waves within the
last 20 years of young adults becoming educated in Ireland, then finding
positions in other countries around Europe. Once the economy begins to
pick up in Ireland, many attempts to move back, and as the trend has shown, are
able to find jobs and send the economy into a spurt of growth.
Perhaps
Spain will experience a similar movement. While Spain has a much larger
population than Ireland, the incentive to find work remains the same. I
have never been to Spain, and while I wouldn’t necessarily know the social
norms to leaving the country, citizens or the Spanish government need to make
an effort to save the 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.
