Until the U.S. jobs market is fixed, economic growth in the United States is simply a farfetched idea.
It’s common sense. If the jobs market is healthy, it means people have jobs, and they have income coming in. Once that happens, Americans pay their bills more easily and spend more money on goods. And that’s how we get growth.
But right now, economic growth is in jeopardy, because the jobs market in the U.S. economy is sluggish to say the least. Politicians and some mainstream media are reporting that we are experiencing job creation; I obviously disagree with them. Employment created in the U.S. jobs market since the credit crisis in 2008 is unequal, as many more retail and low-paying service jobs are being created, versus white collar and manufacturing jobs.
Janet Yellen, Vice Chairwoman of the Federal Reserve, recently said, “It will be a long road back to a healthy job market. It will be years before many workers feel like they have regained the ground lost since 2007.”(Source: CNN Money, ‘Fed official: Fixing the job market could take years,’ February 11, 2013.)
According to a recent New York Times article, of older workers who lost their jobs in the mist of recession, only one in six were able to find another job. In addition, half of those who found jobs took pay cuts and 14% of them said their earnings were less than half of what they earned before. (Source: Rampell, C., “In Hard Economy for All Ages, Older Isn’t Better … It’s Brutal,” The New York Times, February 2, 2013.)
According to Sentier Research, Americans in their 50s and 60s have lost significant portion of their earnings. They are now earning 10% less than they did back in 2009—just after the financial crisis ended. (Source: Ibid.)
There are troubling trends forming in the U.S. jobs market. Consider long-term unemployed individuals. The longer this group stays unemployed, the more difficult it becomes for them to get a job.
To see U.S. economic growth, there needs to be fundamental steps taken to make sure the jobs market grows proportionally. The fact of the matter is that the wounds in the jobs market run much deeper than they appear. The longer the jobs market stays anemic, the longer economic growth stalls.
We already have a significant portion of the U.S. population on food stamps and an increasing number of families falling below the poverty line. The low-wage-paying jobs created in the jobs market are going to make the long-term statistics on consumer confidence and spending worse, not better.
What He Said:
“Home sales down 8.4%, could be the bottom,” read the headline in last Friday’s USA Today. What do they know that I don’t? They know what realtors and their associations tell them and that’s about it. Unfortunately, the real estate news is predominately written by reporters—not real estate investors with years of experience to share. The hard facts about the real estate market in the U.S. are truly scary. How can the U.S. economy escape the hard landing in U.S. home prices? As we’ll soon find out, it simply can’t!” Michael Lombardi in Profit Confidential, January 31, 2007. While the popular media was predicting a bottoming of the real estate market in 2007, Michael was preparing his readers for the worst of times ahead.