The US economy has been growing at a solid pace, though not quite at the ‘recovery’ pace that has been the case coming out of previous recessions. One of the bright spots has been the drop in unemployment. Yet there are signs of weakness, even after a few years of economic growth.
The unemployment rate has been dropping slowly for the last several years. However, there have been concerns about ‘labor participation’ and ‘underemployment’, which means to most of us who are not economists that things may not be as good as traditionally reported measures indicate.
The unemployment rate for October remained at 3.7%, the best since 1969. However, the ‘underemployment rate’ for October increased to 7.6% from 7.4%, largely the result of people working part-time who want full-time work. The number of people working part-time because they could not find full-time work increased by 211,000. Even more, the average work week fell to 34.4 hours in November which was the lowest in 14 months.
Normally with such low unemployment we would see a rise in wages as the law of supply and demand takes effect and businesses pay more as workers are harder to find. Yet, we haven’t seen the growth in household wages that we would expect with such a low unemployment rate. The fact that the number of people not able to find full time work so take part time work instead and the decrease in the average work week tell us that the labor market is still soft and real wages are not rising. That’s concerning
We should not dismiss the good news-unemployment is down even if there are qualifiers. Possibly even better, the increase in employment has reached minority communities. The data shows that minority unemployment has dropped significantly, as well, so the improvements in the economy are reaching across the socio-economic spectrum. And initial reports of retail sales for the holiday season show strong growth year over year, indicating a high level of consumer confidence.
Yet the improvements haven’t translated into improved wages and standards of living, as of yet. And there are troubling things ahead. No matter what the President says, the trade wars are starting to take a toll. Farm incomes have been hit, as have exports. The US economy has lost billions of dollars, according to studies. As the economy begins to slow, that will become more evident and have more of an impact. Looming on the horizon is the impact of the vastly increased Federal deficit which will become a drag on the economy.
As we come to the end of the year, we can look back at a positive 2018 economy. 2019 has some potholes ahead about which we need to be cautious and which the President and Congress need to be vigilant. A new year brings new hope and here’s hoping they can work together to keep the economy on a steady path.