"Labor Market Powers On Despite Growth Concerns"

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

US Government Shutdown

The US Government shutdown could be the root of many problems if it keeps on. The possibility of the shut down continuing into February and maybe even March would cause growth rates to fall to a place where unemployment would creep up. According to the University of Michigan, consumer sentiment was at its lowest point since Trump won the election in 2016.

The key threshold mentioned in the article for GDP growth is 2%, according to Mark Zandi. Although, that is considered a modest estimate as 1st quarters tend to be slow and the shutdown does not help any growth.

After reading this article, it is difficult to ignore the fact that a lack of agreement between both parties could really put the economy in a tough place. Obviously it makes everyone question if all of this disagreement over a border wall is really worth the toll we are going to take on our economy. Before all of this, the economy was already looking like it was slowing down with the rising interest rates. This could really put a damper on the economy going into the 2nd quarter.




https://www.cnbc.com/2019/01/18/shutdown-if-not-resolved-soon-could-be-fodder-for-recession.html