January 24, 2018
Source: The Wall Street Journal
In the article by Sarah Chaney, the topic of record low unemployment is discussed as a positive economic indicator to quell fears of lagging growth and slowdown. One portion of labor market strength mentioned was the record low layoffs that rival 1969 data; seasonally adjusted claims of 199,000 in January of 2019 compared to 197,000 in November of 1969. Chaney notes that both the trade tensions between the US and China as well as the ongoing government shutdown have created a fear of slowing economic growth, mainly due to perceptions of instability in my opinion. I would also note, however, that the volatility of the stock market in November and December and record losses would also shake consumer confidence due to unpredictability, increasing these fears. In contrast, it seems like strong labor data in the US is managing to overshadow these fears as Jesse Rothstein, an economics professor at UC Berkeley, notes that “The fact that the jobless claims [number] has remained steady is an indication that these are still just concerns.” Moreover, low unemployment at at 3.3% (according to the BLS), job creation, and wage growth all support the claim.
Interestingly enough, the government shutdown has delayed the release of key economic from the commerce department that would reveal more insight. Federal workers affected by the shutdown who are able to claim unemployment benefits are lower than the shutdown in 1996 according to a Barclays analyst. This could be due to the fact that furloughed workers are required to to repay the benefits they receive if they receive their paycheck after the shutdown. To me this is definitely a disincentive to even apply for the benefits and prevents these workers from stable income.
In all, the labor market seems stable amidst slowdown concerns, yet in strong contrast, I am concerned about the furloughed workers being able to make ends meet without a stable form of income.
Link: https://www.wsj.com/articles/u-s-jobless-claims-fell-to-49-year-low-last-week-11548336850?mod=hp_lista_pos4
3 comments:
Hilary, your article is somewhat similar to mine in the fact that the government shutdown is having an impact on the US and even global economy. It's extremely interesting to think that economic indicators have not been released due to the shutdown, when we are in such a time where those indicators would be great to see in order to judge the future. Hopefully, all of the volatility will settle once the government reopens, but it doesn't seem that way.
I think your points on federal workers being affected directly from the government shutdown are quite interesting. I was unaware that these employees could receive unemployment benefits, then essentially pay them back. I think that defeats the entire purpose of "unemployment benefits".
With regards to the market, I'm interested to see how the market will react when the SEC officially opens back up. A lot of companies tend to launch IPOs in the first two quarters of the year, and in this case, firms cannot go public due to the shutdown. The stock market has been rallying over the month of January, even with the shutdown, so it will be interesting to see how the market reacts when the government opens back up and more macroeconomic indicators get published.
I agree that the labor market seems to be at a steady low rate of unemployment, showing that many people have stable jobs. As was stated in the blog, the government shutdown has affected the accuracy of our unemployment estimations because the government is not issuing economic data to prove or disprove our estimates and the government employees are being discouraged in applying for unemployment payments because they will have to give the money back when they finally get paid. The government employees are working without payment and are not able to spend money to boost the economy as they normally would. The shutdown has brought fear to the workers that the growth rate will decrease, in turn it could lead to higher unemployment rates as the shutdown continues. This is contrary to our current optimistic indications. The government shutdown is affecting how we can predict how our economy will run in the future and therefore it is also affecting consumer confidence in the US.
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