Posts Tagged ‘GDP’
Finally some good news in the U.S. jobs market?
The Bureau of Labor Statistics (BLS) reported Friday that, in November, 203,000 jobs were added to the U.S. jobs market. As a result, the unemployment rate went down to 7.0% from 7.3% in October. In addition to this, the BLS also revised the job numbers from October and September, saying 20,000 more jobs were created than previously reported. (Source: Bureau of Labor Statistics, December 6, 2013.)
Yes, the jobs market report for November is a step in the right direction. And, while I’m certain the politicians and the mainstream will have a field day with this news, the underlying statistics in the jobs market are not improving.
The underemployment rate, which includes people who have given up looking for work and those who have part-time jobs that want full-time jobs, still sits at 13.2%.
In addition, the number of long-term unemployed, those who are out of work for more than six months, made up 37.3% of all unemployed in November! There are 4.4 million long-term unemployed people in the U.S. and the longer they stay out of work, the harder it will be for them to get back into the market.
Finally, the majority of jobs created in the U.S. economy continue to be created in the low-wage-paying sectors.
The bottom line here is that the “official” unemployment numbers do not reflect what’s really going on in the jobs market. But the official rate is going in the right direction…and moving close to the point (6.5% unemployment) where the Federal Reserve said it would start pulling back on its money … Read More
On the surface, the recent U.S. GDP numbers looked great. I hear the U.S. economy grew at a revised annual pace of 3.6% in the third quarter of 2013—its fastest GDP growth rate since at least the financial crisis. (Source: Bureau of Economic Analysis, December 5, 2013.)
But when I look closer at the numbers released by the government, I discover the U.S. economy didn’t grow due to consumer spending, the most important factor of economic growth, but rather due to a lack of consumer spending!
Let me explain…
In the third quarter, real personal consumption expenditure (a measure of consumer spending) increased by only 1.4%. That’s down 30% from the second quarter!
So how did GDP rise so much in the third quarter while consumer spending pulled back?
U.S. GDP increased in the third quarter because businesses stockpiled more of their goods. In the third quarter, private inventories increased by $116.5 billion; in the second quarter, they increased by $56.6 billion; and, in the first quarter, they increased by $42.2 billion.
The way GDP is calculated, an increase in business inventories pushes up GDP growth! Now the kicker: almost 50% of the increase in U.S. GDP in the third quarter came from an increase in business inventories!
This worries me a lot.
Rapidly increasing business inventories is a major sign that consumer spending isn’t growing. Those who say there’s economic growth in the U.S. economy have to be very careful in their conclusion. Consumer spending is the backbone of U.S. economy. If it declines, we will have economic suffering across the board.
As some point, businesses will … Read More
The modification to the current one-child policy, which I recently discussed in these pages, will help create an even bigger middle class in the country that will drive up the demand for goods and services. (Read “China’s Expected Baby Boom a Boon for U.S. Business.”)
The Organization for Economic Cooperation and Development (OECD) has become more bullish on China, and predicts Chinese gross domestic product (GDP) growth will rise to 8.2% in 2014, driven by a rise in domestic consumer spending. (Source: “OECD sees China growth accelerating in 2014,” China Daily, November 20, 2013.) The OECD even goes as far as to say the Chinese economy could surpass the U.S. economy to become the world’s biggest economy by 2016. While this is faster than I expect, it’s clearly not impossible, given the rise in income levels and spending.
The middle class in China will drive the economic engine of the country, unlike what we are seeing in America with the declining spending prowess of the middle class. In fact, what we are seeing in China is similar to the power of the U.S. middle class that drove the Industrial Revolution in the late 1800s and early 1900s.
If China can emulate what happened in the U.S. then, there could be some golden years ahead for the Chinese economy.
To play the expected rise in consumer spending in China, which is increasing at double-digit rates and is likely to … Read More
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