Lowest U.S. Unemployment rate in over a half century

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ASPartOfMe
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03 Feb 2023, 3:00 pm

The U.S. added 517,000 jobs in January and now has the lowest unemployment rate since 1969.

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The past several months have been dominated by headlines of layoffs at high-profile companies, particularly in the tech industry.

But Friday morning, the Bureau of Labor Statistics reported that the U.S. added 517,000 jobs in January, while the unemployment rate fell to 3.4%, the lowest it's been in five decades. In total, 5.7 million U.S. workers remain unemployed, the lowest number since 2000.

As University of Michigan economist Justin Wolfers noted in a tweet after the release of the jobs report on Friday morning: "Real America is getting back to work."

"The labor market is pretty strong," said Elise Gould, senior economist at the left-leaning nonprofit Economic Policy Institute, in an interview in advance of Friday's report. "The unemployment rate is low, and there are still people who have not returned to the labor market after the pandemic, so we can expect the labor force can grow. But we've had an incredible couple of years of recovery."

Additional data this week showed the strength of the jobs market: There remained more than 11 million job openings in the economy in December, and the weekly count of first-time filers for unemployment benefits has fallen to 183,000 — a nine-month low.

The jobs gains run counter to the announcements by some brand-name firms in Silicon Valley. A handful of tech companies, including Amazon, Google-parent Alphabet, Facebook-parent Meta, Salesforce, IBM, Intel, Microsoft, Salesforce, Twitter and others have cut thousands of jobs in recent months.

Layoffs are brutal life-altering events. But there is evidence that many of those who’ve lost their jobs have been able to secure new ones in a relatively short period of time.

A recent ZipRecruiter survey conducted in the last three months of 2022 found that more than half of recently hired workers found their job within a month of searching, and more than 4 in 5 found their job within three months.

Even in the hard-hit tech industry, bounce-backs have been robust: ZipRecruiter found that among workers recently laid off from a tech job, 37% found a new job within one month, and 79% found a new job within three months.

But at least one group foreshadowed the ongoing jobs boom. The consulting firm Robert Half announced this week that a survey of 2,000 hiring managers showed 58% anticipated adding new permanent roles during the first half of the year, up from 46% just six months ago.

In fact, managers in technology (64%) and finance and accounting (62%) saw the greatest full-time staffing needs. The survey did find 72% of managers plan to hire more contract professionals in the first half of 2023, compared to 45% six months ago.

“Hiring tends to pick up at the beginning of the year, as budgets have been approved and teams seek additional support for initiatives that will drive business growth and customer retention,” said Paul McDonald, senior executive director of Robert Half, in a statement.

“As job openings and turnover remain high, employers need to play offense — and be prepared to negotiate — in order to recruit and retain skilled talent.”

Julia Pollak, chief economist at ZipRecruiter, says the economy is returning to a more "balanced" distribution of job growth after the pandemic sparked massive layoffs in leisure and hospitality, but there's been an uptick in sectors like warehouse and delivery.

Health care, she said, will be at the forefront, as evidenced by the sector adding 70,000 to 80,000 new jobs each month since last June.

"The economy is getting back to normal, where job growth is not just being shaped by the pandemic recovery but by longer-term forces like demographics and technological change, which will also be more durable," Pollak said in a recent interview.

Green jobs like solar and wind technicians, spurred in part by President Joe Biden's multibillion-dollar Inflation Reduction Act, are also likely to see outsized growth.

And in Sun Belt states like Texas and Florida, the job growth will be faster than in other parts of the country, Pollak said. Georgia, Kentucky and Michigan are on track to land large electric battery factories that will build the components that power electric vehicles.

Slowing wage growth is not great news for workers. Indeed, their inflation-adjusted "real" wage gains for much of the pandemic and post-pandemic period have been negative because price growth has been so fast.

But EPI's Gould said that as inflation continues to fall, workers will likely continue to see real earnings gains.

"Hopefully they're going to be catching up some to the higher inflation we’ve been seeing last year," she said.


I know of one group of people who should be laid off dispute the booming economy. All of those economists who were and still are insistent a recession is just around the corner. If they keep on on predicting a recession one day it will happen.

If this keeps up through next year unless Biden literally can’t string two words together he is the nominee and the Republican primaries will be an irrelevant exercise.


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DW_a_mom
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03 Feb 2023, 9:43 pm

It remains expedient for conservatives to focus on inflation and stock drops as ways of keeping large swaths of Americans believing the economy is in terrible shape at the moment, and its all Biden's fault.

Seriously, how many people are even aware of the record low unemployment? It's been true for a while, but you don't hear much talk about it from ordinary people. People are focused on the lay-offs that do happen, what their eggs cost, etc; not on the positive signs.


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Minder
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03 Feb 2023, 10:09 pm

DW_a_mom wrote:
It remains expedient for conservatives to focus on inflation and stock drops as ways of keeping large swaths of Americans believing the economy is in terrible shape at the moment, and its all Biden's fault.

Seriously, how many people are even aware of the record low unemployment? It's been true for a while, but you don't hear much talk about it from ordinary people. People are focused on the lay-offs that do happen, what their eggs cost, etc; not on the positive signs.


It should be noted that the unemployment rate only counts people who are without job and actively looking for one. It doesn't count people who've given up.

Also, while many people are working, we still have the issue of wages being too low and living costs too high.

Still, this is good news overall.



DW_a_mom
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06 Feb 2023, 7:00 pm

Minder wrote:

Also, while many people are working, we still have the issue of wages being too low and living costs too high.



True enough, but there are efforts to raise wages, which then pushes up on inflation ... Economics is complicated, as we know.


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uncommondenominator
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06 Feb 2023, 7:55 pm

DW_a_mom wrote:
...raise wages, which then pushes up on inflation...


I'm not sure that this is as true as businesses would have us believe.

Economics is indeed complicated, and sometimes that is used to obfuscate how the mechanism actually works.



stratozyck
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06 Feb 2023, 8:33 pm

Economist here, PhD and all. Am willing to prove if need be. Anyways let me explain whats been going on.

I was on "Team transitory" in that I told all my coworkers and random people on the internet that inflation would be over in a year or so. My reasoning for believing this was that 1) the long term demographic trends are pulling inflation down - when you got a lot of retirees and lower population growth, its hard to maintain a booming economy and 2) The long term treasury bill rates - these are the rates that the government borrows at - was showing that bond traders expected the 10 year average inflation rate to be below 3%. I do not know more than bond traders so I defer to their estimates.

I also don't think we will have a recession. I was never asked of course because I am a lowly private sector analyst that doesn't work directly in economics. The reason is what the experts are overlooking, in my view, is that personal savings were relatively healthy. Also, corporate profits are strong.

Still, the history is pretty good and I can see why people were predicting a recession. The yield curve is inverted and that has historically tracked with recessions. Usually when interest rates go up, companies' interest rate expense goes up so they respond by laying off workers and/or delaying new projects. We very well still could have a recession if the federal reserve doesn't knock it off soon. Businesses tend to get interest only loans that are indexed to some interest rate that represents the "market" such as LIBOR.

One thing you should be aware of though is that there is a stark difference between business economists and academic economists. Business economists tend to skew right wing, whereas academic economists are about 6:1 Dem - even at that ratio its still more "GOP" than the social sciences as a whole.

They also see different things. Business economists are going to see corporate data that academics don't get access to. In my role I see the default rates of financial portfolios. They have ticked up a bit, but hardly at rates that are alarming. Academic economists tend to work with different data sets, although the gap is shrinking. Your best pulse on the economy is a data set such as ADP payroll data. You can track unemployment better with ADP payroll data and academic economists have been using more of that.

What I can say being in Finance is that a lot of business types want there to be a recession. They don't like Biden and democrats. I work for one of the "major" banks. Our CEO has repeatedly emailed the entire organization about "the turbulent economic times we are in." I'm like... "based on WHAT data?" All of our managers are very right wing and my own boss was running around worried about hyperinflation. These are people in finance, and they don't really know how the economy works. They just don't they don't like taxes so they hate democrats.

Theres simply no data showing we are in a recession or near one at this time. The yield curve being inverted is like a strong wind and someone going, "a storms a coming." But right now where we are, its not storming. It could still mean a storm hits, or maybe it doesn't hit.

I wouldn't fault someone for predicting a recession when the yield curve is inverted like it is. In that situation its like, "more often than not, one is coming." But remember that markets are driven by human emotions and a lot of people participating in markets read Fox news and something like 90% of GOPers think we are already in a recession, despite no evidence.



stratozyck
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06 Feb 2023, 8:39 pm

uncommondenominator wrote:
DW_a_mom wrote:
...raise wages, which then pushes up on inflation...


I'm not sure that this is as true as businesses would have us believe.

Economics is indeed complicated, and sometimes that is used to obfuscate how the mechanism actually works.


Wages are part of inflation, its true. From an employer point of view, wages are a cost like materials.

In the 1980s when unions were stronger, many unions had contracts that required 7% annual raises. When this happens to a large enough section of the economy, it definitely does increase the "core" inflation.

Collapse of unions meant that this part of inflation is no more.



uncommondenominator
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06 Feb 2023, 9:55 pm

stratozyck wrote:
uncommondenominator wrote:
DW_a_mom wrote:
...raise wages, which then pushes up on inflation...


I'm not sure that this is as true as businesses would have us believe.

Economics is indeed complicated, and sometimes that is used to obfuscate how the mechanism actually works.


From an employer point of view, wages are a cost like materials.



While this is the way it's taught, if you question the baked-in assumptions often present in business academics, you start to see a few instances where "good business practices" are in fact what cause the problems in the first place, which coincidentally, the businesses also benefit from in many cases.

One such example is seeing "labor" as purely an expense, and ignoring it as an asset, since that labor is what makes the money for the company in the first place. Even the likes of Taylor and Galbreath understood the idea, proposed the idea, that the profits should be shared with all who contribute to them, but you can't do that if your labor is only seen as an expense rather than an asset. These days, businesses seem to ignore that part in favor of the principle of "opportunity cost", and since "cutting labor costs" is a great opportunity to make more money, and economically makes perfect sense.

Businesses claim that if they raise wages, they have to raise the price. They cite the same fact, that labor is an expense, and if expenses go up, that raises the price. But there's a gap between expenses and price - and that's profit. THIER profit. Profit from YOUR labor. So what they're saying is, we refuse to pay for your raise ourselves, so we're passing that cost on to the consumer. They're making you pay for your own raise, rather than it eating in to their annual growth, or yearly bonus, or comfy pension. Which is a "good practice" as it does "maximize profits".

Tl; dr, increasing wages might not actually increase inflation if it wasn't used as an excuse to raise prices to avoid having it come out of their pocket, and using the added "value" to contribute to their own growth and enrichment in the process.



stratozyck
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06 Feb 2023, 10:30 pm

uncommondenominator wrote:
stratozyck wrote:
uncommondenominator wrote:
DW_a_mom wrote:
...raise wages, which then pushes up on inflation...


I'm not sure that this is as true as businesses would have us believe.

Economics is indeed complicated, and sometimes that is used to obfuscate how the mechanism actually works.


From an employer point of view, wages are a cost like materials.



While this is the way it's taught, if you question the baked-in assumptions often present in business academics, you start to see a few instances where "good business practices" are in fact what cause the problems in the first place, which coincidentally, the businesses also benefit from in many cases.

One such example is seeing "labor" as purely an expense, and ignoring it as an asset, since that labor is what makes the money for the company in the first place. Even the likes of Taylor and Galbreath understood the idea, proposed the idea, that the profits should be shared with all who contribute to them, but you can't do that if your labor is only seen as an expense rather than an asset. These days, businesses seem to ignore that part in favor of the principle of "opportunity cost", and since "cutting labor costs" is a great opportunity to make more money, and economically makes perfect sense.

Businesses claim that if they raise wages, they have to raise the price. They cite the same fact, that labor is an expense, and if expenses go up, that raises the price. But there's a gap between expenses and price - and that's profit. THIER profit. Profit from YOUR labor. So what they're saying is, we refuse to pay for your raise ourselves, so we're passing that cost on to the consumer. They're making you pay for your own raise, rather than it eating in to their annual growth, or yearly bonus, or comfy pension. Which is a "good practice" as it does "maximize profits".

Tl; dr, increasing wages might not actually increase inflation if it wasn't used as an excuse to raise prices to avoid having it come out of their pocket, and using the added "value" to contribute to their own growth and enrichment in the process.



1) Wages can go up over inflation, this is real wage growth. Inflation is a general rise of the cost of things, and labor is one of them. That doesn't mean that every wage increase is inflation. Nor is every increase in the cost of materials.

2) If the cost of any input goes up, the producer's ability to pass that on to their customer is dependent on market factors. If they can pass them on and don't, they will replace their management with someone who will.

This is called the "pass thru" elasticity. If wages go up in an industry that has low market ability to pass on costs, it will eat most of the costs. If costs are going up for all markets, their ability to pass on cost increases depend on the ability of all of their customers to pay for it. If wages are going up nominally with inflation, then the "pass thru" can be effectively 100%.

This is how you get Argentina with 30%+ annual inflation and people don't lose their minds. Yeah costs go up 30% but your wages go up 30%. Its a hard cycle to break. One side has to break first, and typically that can cause some severe economic downturns.

3) The goal of every producer is to produce an infinite amount with zero inputs. That is of course not feasible. You'd rather have the production without the inputs. If we could have 10 million iPhones produced per year without using any labor and/or machines, we'd be richer.

Of course labor is an asset for the producer but it is a cost to the worker. Ideally you want all your stuff without having to give your labor. But thats not the world we live in. Wages are an asset to the worker and a cost for the producer.

Wages most certainly can go up without it being inflation. If workers become more productive or their bargaining power increases, wages go up.

What has happened in the past 40 years is that workers bargaining position has weakened due to decreased union participation and foreign competition. In fact, foreign competition is much more important than union participation because even if union participation was 100%, if producers can use foreign labor then union's bargaining position also weakens.

A lot of the statistics you see flying around about wages vs productivity gains are somewhat dishonest. They don't count non wage benefits in those numbers and health care costs have skyrocketed.

Because it's a global world, producers can't simply decide to not pass on costs. Investors would shift their investments to ones that did. A lot of people said a lot of nice things about what workers should be paid and how they should be treated, but the reality is the cold hard machinery of markets doesn't do that unless forced.

There shouldn't be so much focus on wages. Instead, we should pay some significant attention to how to reduce costs for the typical person, and how to tax the people who are making lots of money on the system to redistribute to those that don't.

Land use restrictions are a real problem that is often overlooked. In most areas of the country, I can't buy an unused office space and convert it to a 2 bedroom apartment. That lack of flexibility increases rental costs. Existing landowners in an area often the ones who oppose any measures to reduce rental prices.

In theory, low wages aren't necessarily a problem unless people can't find living arrangements at that wage. If my wage were $4/day but I could legally find a place to rent for $2/day and food for $.50/day, then the market works. The problem is the minimum costs have increased over time. My example sounds extreme but its not that far off from how unskilled immigrants from Central America live in the US. I used to live next to a small house that about 10 of them lived. None of it was legal, but they were more than happy to live there as opposed to where they were living.

We've also "internalized" a lot of risk which costs more money. Because medical care wasn't that great in the 1850s no one really cared about medical spending. You paid the cost by dying earlier and more horribly. Now we have better care so now we have that added cost. Same reason cars are so much more expensive. Auto fatalities per person are down but cars are more expensive.

In theory it should be fine if people can pick to buy cars that are less safe and pay less, but the regulations are such that you can't. I am not saying the regulations should be repealed, just that its something we as a society have decided to do.



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07 Feb 2023, 8:11 pm

stratozyck wrote:
Economist here, PhD and all.
---
What I can say being in Finance is that a lot of business types want there to be a recession. They don't like Biden and democrats. I work for one of the "major" banks. Our CEO has repeatedly emailed the entire organization about "the turbulent economic times we are in." I'm like... "based on WHAT data?" All of our managers are very right wing and my own boss was running around worried about hyperinflation. These are people in finance, and they don't really know how the economy works. They just don't they don't like taxes so they hate democrats.


I love it when you chime in. I do understanding that predicting economic outcomes is never an exact science, but your analysis and opinion are much appreciated. I am far, far from an economics expert, but it is a very interesting subject.

As for your political comment, I would have to agree. It feels like its rather obvious when it comes to conservatives that they don't WANT Biden to succeed and, thus, do their best to bury or distort all the evidence whenever he has. Not the first out-of-power party to do that. My disappointment is that so many Democrats and Independents seem to be buying the spiel; that I had not expected. But, politics isn't an exact science, either.

Anyway. Thanks for your comments.


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08 Feb 2023, 9:14 am

Most of the gains in employment have occurred in low-wage jobs.

More and more people in the United States are living paycheck to paycheck. I used to live that way; I lived that way for many years. So I know how that feels. There are people who work 2 or 3 jobs who have to shuttle forth from hotel to hotel because they can't come up with two months rent, two months security. And, in most of these hotels, one cannot bulk-shop because there's no refrigerator and no stove. You can only do so much with a microwave.



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08 Feb 2023, 9:50 pm

stratozyck wrote:

and how to tax the people who are making lots of money on the system to redistribute to those that don't.



So we at least agree that those who make tons of money should be expected to contribute to the system that allows them to become so enriched in the first place.

If only there were some way to lower Executive Salaries (which are also an expense, albeit an administration expense rather than a production expense, but an expense none the less - but nope, can't ever touch those sacred executive salaries or pensions), and use the extra capital to fund an account to distribute that capital to the lower-paid employees at the same company. Almost like some sort of "wage increase", you could say. Since the capital comes from an already existing expense, there's no need to increase prices, since it isn't an ADDITIONAL expense, it's a reallocation of funds, not related to production. All you did was change which pocket that money goes into. Don't raise the price, and inflation doesn't happen, cos there's no additional value being created.

I can see where you're coming from as an economist, but economics also sees "winning" as "losing" under a number of situations. Econ and accounting (as well as a large portion of big business theory in general) are both guilty of sometimes being a little too focused on the dollar, at the expense of people or the greater good. Conveniently, business curriculum treats administrative pay like it's sacred, and can't be touched, and "worker" pay as nothing but an expense to be minimized. - even though we've seen that businesses can function w/o executives for months and nobody would notice, but if the workers stop working for a day, the world falls apart.

I get "how it is", but I still question that it "has to be" that way.



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09 Feb 2023, 6:35 pm

kraftiekortie wrote:
Most of the gains in employment have occurred in low-wage jobs.

More and more people in the United States are living paycheck to paycheck. I used to live that way; I lived that way for many years. So I know how that feels. There are people who work 2 or 3 jobs who have to shuttle forth from hotel to hotel because they can't come up with two months rent, two months security. And, in most of these hotels, one cannot bulk-shop because there's no refrigerator and no stove. You can only do so much with a microwave.


Its crazy expensive to be poor, isn't it? I became a lot more acquainted with that reality when I tried to help my former nanny out. I don't think most people are aware of that when they talk about "learning to be frugal," "pulling yourself up by the bootstraps," etc. My kids are frugal, but they can AFFORD to be frugal. It's all about the head start, and we made sure they had it.

The income inequality in the US is definitely an issue, but it is also a very long term issue. New policies will take decades to bear fruit. It took a long time for everyone to look back and see the damage Reagan policies did, and it will take a long time before we can know if Biden's efforts put a dent in it.


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