There is no getting around it – we are at or reaching full employment, as the Trump economy roars along. The official unemployment figures are not the best gauge of the US employment picture … but 3.9% is simply hard to debate with.
For years we have been pointing out that the real number to look at when considering where employment stands in the United States is the “U6” number put out by the Bureau of Labor Statistics (BLS). This number more accurately reflects the state of employment – as it captures not just those reportedly not working but the: “…Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”
But 3.9% … you simply can’t fudge those numbers. America has gone back to work!
Eight years of the anemic growth and confidence-destroying policies of the previous Administration have been swept away by robust free market policies, tax reform, and a reduction in government regulation. It has been a complete reversal of the life-strangling government over-reach of the recent past.
Still, there are pros and cons to the employment numbers, specifically the sluggish GDP that remains below 3% despite the optimistic projections we heard in 2017. Lets take a look:
I. Highlights of the US economy with such low unemployment numbers:
- “91 straight weeks of job growth”: This is the longest streak of job gains in recorded history. The numbers for job growth are simply staggering and they support the continued optimism for business expansion.
- “U6 number dropping as well”: As described above, the U6 number is a better determinant of the health of the jobs market. While remaining historically elevated, the number has dropped from 8.0 to 7.8% year over year.
- “Still room for wage growth”: Wage growth has lagged for the last decade … some academic articles suggest stagnant wage growth going back decades. The current year-over-year is 2.6%, ahead of inflation … barely. But in an economy with full employment, retaining employees and finding new one’s means paying more. There is tight demand for labor in the US.
II. Areas that need improvement in the US economy:
- “U6 remains historically high”: Despite the continued downward trend in unemployment, the U6 employment remains stubbornly high. It is a broader reflection of actual employment in the US – such as those working part time jobs who want, and need, full time jobs. When you factor in the historic high numbers of those taking federal disability assistance, and that many of those could be gainfully employed, we still remain a country with large numbers of people without work who could be working.
- “US GDP still below 3% quarterly”: Despite two quarters of above 3% in 2017, and the 4th quarter at 2.9%, the GDP numbers trickled back down to 2.3% for the first quarter of 2018. That is WAY better than 2009-2016, but remains too low to make big dents in US budget deficits and personal household wealth.
- “We’ve said it before … we are nearing the end of a very long bull market”: You can’t be at or near full employment and not be nearing the end of a bull market. Although the current bull has been running thanks to historic and gargantuan artificial stimulus under the previous administration, and has been supercharged recently with pro-market stimulants such as tax reform and regulatory reductions, employment numbers like we have are suggesting the bull run has most likely run its course.
The unemployment numbers look great for hard-working American citizens. Those job gains are well-deserved after enduring so many years of stagnation.
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