Why has Employment Growth Been Strong? Revisiting the Challenges of Changing the U.S. Labor Market after the Great Depression

The Burning Glass Institute has a chief economist named Gad Levanon. He was the former head of The Conference Board’s Labor Market Institute. The opinions he gives in this commentary are his own.

Why had employment growth been so strong? First, the US economy is holding on better than many expected. The Atlanta Fed’s GDPNow estimate for real GDP growth in the third quarter of 2022 is 2.3%, suggesting that while the economy is now growing much more slowly than it did last year, we are still not in a recession. When the demand for goods and services increases, so does the need for workers to produce them.

A tight labor market and rapid wage growth has made inflation more entrenched. The Consumer Price Index, which measures a basket of goods and services, was 8.3% year-over-year in August. That’s lower than the 40-year high of 9.1% in June, but still painfully high. The Federal Reserve’s actions will likely cause the economy to be in a recession in 2023.

Even though the economy is slowing and the fears of a recession have grown, layoffs are still historically low. Initial claims for unemployment insurance were higher than the previous week, but still one of the lowest readings in recent decades. Employers are not inclined to significantly reduce workers even though their businesses are slowing because of the traumatic labor shortages. Companies are concerned they won’t be able to recruit new workers when they start expanding again.

Fifth, during the pandemic, corporate investments in software and R&D reached unprecedented levels, which drove a rapid increase in new STEM jobs. Because of the high disposable income these workers have been able to spend it on goods and services which has supported job growth throughout the economy.

It will look very different next year. Many of the industries that are still recovering from the pandemic will have reached pre-pandemic employment levels. With less demand, those industries may slow down their hiring. But this alone is unlikely to push job growth into negative territory. monetary policy will do that.

There are two ways to rein in the labor market: Either reduce demand for workers or increase the labor supply. It is difficult to increase labor supply. That takes the kind of legislation necessary to increase immigration, grow investment in workforce training or drive people into the labor force. This is likely to prove elusive in today’s polarized political environment.

Why is the US economy in bad shape? When the Fed broke last summer, economists worried about the future of the stock market and stock market

Here’s the thing about elections: When they break, they usually break in one direction. And right now, all the indicators on my political dashboard are blinking red — as in, toward Republicans.

The conditions that helped the Democrats gain over the summer seem to have disappeared, with voters’ sour think of the economy driving the downturn in the party’s prospects, contends a New York Times/Siena poll.

A version of this story first appeared in CNN Business’ Before the Bell newsletter. You’re not a subscriber? You can sign up right here. The audio version of the newsletter can be accessed through the same link.

A lot of economists think we are on the verge of a recession, and it is safe to say the global economy is in bad shape. US markets seem to like it. Stocks closed out their best week since mid-June last Friday and continued that rally into Monday.

So what does this mean? A decade of free flowing money from the Federal Reserve to banks has created two economies according to Nomi Prins, a former managing director at Goldman Sachs. The low rates kept money flowing into businesses and stocks high and Main Street weak, but there was little support. The distortion is where market behavior and economic prosperity have nothing to do with each other.

What’s happening: The stock market has always been unpredictable. The reality is that analysts and economists don’t know what the market is going to do, so they rely on strong, educated guesses.

Unemployment and prices are two things the Fed is mandated to keep within its means, but there are other mandates the Fed is supposed to fulfill. She said they have seen it over the last 14 years. In 2008, the Fed embarked on an aggressive monetary easing policy, and infused money into the financial system by purchasing Treasury securities from the US Government. That created a pervasive idea in the finance world that the stock market would go up no matter what, she explained.

This created a world in which people were dependent on the Fed and the economy was not strong enough to support it.

The credibility problem stems from officials explaining how important their credibility is to lowering inflation rates. If the Fed is to succeed, they said, Americans would need to believe that the central bank is steadfast in its fight to bring down prices.

Prins says that investors do not believe it. The Fed says a policy pivot is not coming, but they still think it is. The Fed will eventually return to its long-term policy of aiding the markets, according to Prins.

Main Street is feeling the effects of the interest rate hikes, through increased mortgage and borrowing rates, and a diminishing jobs market.

Bank of America CEO Brian Moynihan recently told CNN’s Poppy Harlow that a “mild” recession is likely. Economists surveyed by Bloomberg see a 70% chance of a recession in 2023.

The survey shows that many companies have hiked prices because of the high inflationary environment, but some prices have begun to come back down. A total of 9% of respondents indicated prices were falling, the largest share reported since January 2021.

Shortages of labor and raw materials are holding back businesses, according to the survey. The share of respondents reporting shortages remained near record levels.

The Challenge of Rishi Sunak’s Job and the Economics of the UK: A Comparative Analysis from the AP-NORC Survey

Rishi Sunak, Britain’s third prime minister in seven weeks, will face the huge challenge of projecting stability after a period of historic political and financial market chaos. But his other task — shepherding the country through a recession — is poised to be just as daunting, reports my colleague Julia Horowitz.

Sunak campaigned for the job over the summer with promises to help households tackle the rising cost of living, which is causing many to pull back spending. He said he would cut taxes, but only once price pressures eased.

Yet the economic outlook has deteriorated sharply since then — not least because of the market turmoil unleashed by Truss’ now-abandoned plan to slash taxes as soon as possible and boost government borrowing.

Several companies report third-quarter earnings after market close.

October consumer confidence is expected to be released by the Conference Board at 10 a.m.

Partisanship is clearly part of the story. One striking aspect of that AP-NORC survey was that Democrats and Republicans weren’t that different in their assessments of their personal financial situation; majorities of both groups rated their condition as good. But 90 percent of Republicans said the national economy was poor. In June 1980, when unemployment was above 7 percent and inflation was 16 percent, Republicans were more positive about the economy than they are now.

The public does not like how Biden handles immigration and gun policy, according to a poll. According to CNN, Biden had a small hike in approval of his handling of the situation in Ukrainians and of his approach to protecting democracy in America.

The current cost of living represents a near-universal worry, with 93% saying they’re at least somewhat concerned by this, including 63% very concerned. Roughly 8 in 10 (80%) say they’re concerned about the recent increase in interest rates, with 42% saying they’re very concerned. Relatively few are seriously worried about someone in their household losing a job within the next few months – 37% say they’re at least somewhat concerned about this, but just 15% that they’re very concerned.

Most also say they’re taking measures to curb expenses in the past few months as a result of recent economic conditions. Seven out of 10 Americans have cut back on non essential spending in order to afford necessities, with a majority of people changing what they buy in order to stay within budget, according to CNN’s polling this spring. A similar 70% say they’ve had to cut back on how much they’re spending on holiday gifts this year. And 34% say that they’ve had difficulty in finding affordable housing. With gas prices falling, however, the share who say they’ve cut back on driving has ticked downward, from 54% this spring to 49% in the latest poll. A year ago, gas prices were on average just a few cents cheaper per gallon than they are, so it’s still higher than the share who said they had stopped driving.

The divides in Americans’ financial outlooks suggest they’re influenced both by their current level of income and also, in some cases, their partisan support. Two-thirds of Republicans in households making less than $50,000 a year say their finances have worsened in the past one year, as do 45% of Democrats. A majority of Republicans say they are worse off than Democrats in households making $50,000 or more.

This CNN Poll was conducted by SSRS on December 1 through 7 among a random national sample of 1,208 adults drawn from a probability-based panel. Surveys were either conducted online or by telephone with a live interviewer. The margin of sampling error for the full sample is plus or minus 3.6 points, larger for the subgroup.

The Last Year of Economic Growth: The Rise and Fall of the US Economy Compared to the Years 2008-2009 Low-Lying Stock Markets

It was a brutal period for the stock market, with roughly one-fifth of the value of the S&P 500 vanishing and the Nasdaq dropping by more than one-third. The US markets have had their worst years since 2008.

New numbers published last week show first-time applications for unemployment benefits edged up to 225,000. That is still historically low and close to where it was a year ago, before the recession fears emerged.

“This is one reason to the be optimistic the economy could skirt a recession,” Moody’s Analytics chief economist Mark Zandi told CNN on Thursday. Without mass layoffs it is unlikely that consumers will stop buying goods and services.

Gas went above $5 a gallon for the first time in June and has plummeted ever since. The average price for regular gasoline dropped to $3.10 a gallon, an 18 month low, but it has crept higher in recent days to about $3.22 a gallon.

The trend has started to reverse when measured on a monthly basis. Consumers will have more money to spend next year if real wages grow faster than consumer prices.

The fear is that the Fed will eventually overdo it, raising rates so high and keeping them there for so long that it causes a recession — if the Fed hasn’t already done that.

Federal Reserve Chairman Jerome Powell has made it clear the Fed isn’t anywhere near ready to hit the gas on the economy by cutting rates. It’s a positive if it removes its foot from the brake.

Moody’s says economic growth comes to a standstill but never slips into reverse in a slowcession. Unemployment would rise, but not spike.

There is also a real risk of a self-fulfilling prophecy, where nervous business owners and consumers hunker down so much that they cause the very recession they fear.

The employment market is historically strong, inflation is cooling and the Fed may be preparing to pause its rate-hiking campaign.

“Shoppers are the firewall between an economy in recession and an economy that skirts a downturn,” Zandi wrote. “While the firewall is sure to come under pressure, particularly as financially hard-pressed low-income households struggle, it should continue to hold.”

Zandi also pointed to relatively strong fundamentals in the US economy, including profitable businesses, healthy consumer balance sheets and a banking system that is “on about as strong financial ground as it has ever been.”

There are no troubling imbalances in the economy that were glaring before the recessions, according to the Moody’s economist.

Now, this isn’t the first time I’ve written about the disconnect between economic perceptions and reality. In the past, however, I got a lot of pushback from people insisting that the public was in deep shock over the resurgence of inflation after years of more or less stable prices.