One of the President Trump’s claims the economy is doing great, is low unemployment rates. In many ways it is a good news story and most of us agree that low unemployment is a very good thing. It is good because there are many jobs and many people have some level of choice in their lives to move from “dead end jobs” to jobs that people love doing and pay reasonably well.
Linda Nazareth recently wrote a book called Work is Not a Place: Our Lives and Our Organizations in Post-Jobs Economy which says using unemployment rates as a leading indicator is not as valid as it used to be.
Unemployment rate has always been a lagging indicator because of unemployment insurance which means after a plant closes down or people are laid off, they are given money to look for work, but it means they have some level of income coming in. They do not necessarily have to take the next available job, generally it pays less than what they were receiving.
Demographics are the aging baby boom population is one of the reasons why unemployment is low and we are seeing signs of more opportunities in the workplace. The baby boom is retiring and millions of people will continue to retire for another 10 years, these people typically came from families of 7 or more, the next generation the families were 4 – two adults two kids; now the average family is even smaller with one child. Simple math says either increase immigration or there will be more jobs than people. If the structure of the population stayed the same as 1976, the unemployment rate would be 4% higher.
The low unemployment rate does not tell you about the quality of the jobs. If you look around at older workers, many of them had full time and benefits including paid vacations and retirement pensions at the end of their work. The workplace now is full of contracts – from one month to one year. Depends on the income or pay, many people have 2 or more part time jobs rather than one full time. People can pay the bills but …
A paper from the Dallas Federal Reserve examined gig workers who are either self-employed or contractors but who ended up lumped in the broader “employed” figures, even though they had less bargaining power and lower wages than full time workers. It is one of the reasons, many people are $250 from having to juggle their bills or savings rates are low.
Linking to dividend paying stocks, the lesson to be learnt is benchmarks change over time. Older people will hear unemployment is low, that is good, which allows people to spend money in the consumer economy. Younger people might say, unemployment is low but what spending do we have? As you think about the spending for the holidays and retail stores, who do the stores cater to and what type of spending will happen. If you can, one beneficiary buy the charge card companies they make money no matter the average income is, people need to spend money including interest.
There are more questions than answers, till the next time – to raising questions.