Job Growth Jumps, But Is Restrained By Labor Force Growth
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337,000 new nonfarm jobs were created in October, while the unemployment rate climbed from 5.4% to 5.5%. The hiring nearly doubled expectations, which were set low after a disappointing September. However, the labor force increased by 367,000 people. Nonfarm jobs do not correlate directly to employment, which is based on overall employment compared to the civilian labor force (official data and descriptions are here).
The size of the labor force often is more important than the numbers of jobs created, and often fluctuates more (though it almost always increases each month). From August to September, the labor force actually shrunk, and compensated for an overall loss of jobs, to lower the number of unemployed by 19,000.
Productivity, the magic behind the US's manufacturing sector - allowing continued production despite layoffs - incresed by 4.3% for manufacturing, and 2.3% for overall businesses from quarter 2 of 2004 to quarter 4 of 2004. This is a good sign for US manufacturing, but not for short-term employment (greater productivity generally leads to lower employment in the short-term, because fewer people are needed to complete a task).
Economists continue to be worried by several aspects of the US economy; little personal savings (for retirement and whatnot) and the prospect of inflation. Low savings may cost the US in the long-run, once the baby boomer generation retires, and contributes to the US's trade deficit. This trade deficit combined with the Federal debt worried many economists, but the administration hopes to grow the US economy in order to limit and eventually alleviate these problems. Inflation always worries economists, and has increased slightly due to the lack of long-term investment like personal savings (which takes money out of the market, and therefore reduces inflation). However, higher US interest rates are scheduled for the future, and this should help limit inflation.
A second Bush administration, however, may work to crack China's economy open. This would increase US exports, thus shrinking the trade deficit, and allowing China's overvalued currency (which has fueled China's exports) to be affected by the market to properly adjust the value.
Additionally, retirement age will need adjustment, sooner or later. Longer lifespans have contributed to the ever-growing healthcare and social security costs, as retirees live for many more years than expected when the programs were first presented. Due to the unpopularity of raising the retirement age, no president would do so in a first term, but at least a small adjustment is needed to compensate for the retired baby-boomer generation.
The Euro recently hit a high compared to the dollar, but this is not a good sign for Europe. The Euro is already overvalued, and some economists say that a good way to limit this overvaluation is to fund the US deficit. That strong Euro, however, has helped Europe cope with high energy prices.
Europe has a greater long-term problem; low birthrates, unemployment, and overuse of social security/welfare programs. France's population is in a worrying decline, alleviated only slightly by immigration. A shrinking population means that fewer workers will be supporting retirees, who already use much of Europe's economy for social security and healthcare (though healthcare is worse for the elderly than it is for the employed, due to government regulations to limit expenses).
Personally, I think there are some additional factors to the US economy (I'm no economist, so these are uneducated opinions at best). First, with some luck, oil prices should decline within the next 6 months as Iraq improves. Second, Bush's costly education and scientific policies may pay off in the next decade. The 58% increase in education funding is already showing promise, and Bush want to extend No Child Left Behind to highschools. Education policies usually take many years to show effects, simply because education takes over a decade and has no clear barometer. Additionally, NASA makes a tenfold (or more) profit for the government over the long term, due to the new technologies and products that the agency creates.
These programs should propel the US technological lead, which has maintained the US economy despite expensive labor costs and regulations. To best benefit from this, the US must enforce copyrights on China, which copies every product it can find (including parts from the US spyplane that crashed in China during the Clinton administration).
That's my economic summary for the day.
337,000 new nonfarm jobs were created in October, while the unemployment rate climbed from 5.4% to 5.5%. The hiring nearly doubled expectations, which were set low after a disappointing September. However, the labor force increased by 367,000 people. Nonfarm jobs do not correlate directly to employment, which is based on overall employment compared to the civilian labor force (official data and descriptions are here).
The size of the labor force often is more important than the numbers of jobs created, and often fluctuates more (though it almost always increases each month). From August to September, the labor force actually shrunk, and compensated for an overall loss of jobs, to lower the number of unemployed by 19,000.
Productivity, the magic behind the US's manufacturing sector - allowing continued production despite layoffs - incresed by 4.3% for manufacturing, and 2.3% for overall businesses from quarter 2 of 2004 to quarter 4 of 2004. This is a good sign for US manufacturing, but not for short-term employment (greater productivity generally leads to lower employment in the short-term, because fewer people are needed to complete a task).
Economists continue to be worried by several aspects of the US economy; little personal savings (for retirement and whatnot) and the prospect of inflation. Low savings may cost the US in the long-run, once the baby boomer generation retires, and contributes to the US's trade deficit. This trade deficit combined with the Federal debt worried many economists, but the administration hopes to grow the US economy in order to limit and eventually alleviate these problems. Inflation always worries economists, and has increased slightly due to the lack of long-term investment like personal savings (which takes money out of the market, and therefore reduces inflation). However, higher US interest rates are scheduled for the future, and this should help limit inflation.
A second Bush administration, however, may work to crack China's economy open. This would increase US exports, thus shrinking the trade deficit, and allowing China's overvalued currency (which has fueled China's exports) to be affected by the market to properly adjust the value.
Additionally, retirement age will need adjustment, sooner or later. Longer lifespans have contributed to the ever-growing healthcare and social security costs, as retirees live for many more years than expected when the programs were first presented. Due to the unpopularity of raising the retirement age, no president would do so in a first term, but at least a small adjustment is needed to compensate for the retired baby-boomer generation.
The Euro recently hit a high compared to the dollar, but this is not a good sign for Europe. The Euro is already overvalued, and some economists say that a good way to limit this overvaluation is to fund the US deficit. That strong Euro, however, has helped Europe cope with high energy prices.
Europe has a greater long-term problem; low birthrates, unemployment, and overuse of social security/welfare programs. France's population is in a worrying decline, alleviated only slightly by immigration. A shrinking population means that fewer workers will be supporting retirees, who already use much of Europe's economy for social security and healthcare (though healthcare is worse for the elderly than it is for the employed, due to government regulations to limit expenses).
Personally, I think there are some additional factors to the US economy (I'm no economist, so these are uneducated opinions at best). First, with some luck, oil prices should decline within the next 6 months as Iraq improves. Second, Bush's costly education and scientific policies may pay off in the next decade. The 58% increase in education funding is already showing promise, and Bush want to extend No Child Left Behind to highschools. Education policies usually take many years to show effects, simply because education takes over a decade and has no clear barometer. Additionally, NASA makes a tenfold (or more) profit for the government over the long term, due to the new technologies and products that the agency creates.
These programs should propel the US technological lead, which has maintained the US economy despite expensive labor costs and regulations. To best benefit from this, the US must enforce copyrights on China, which copies every product it can find (including parts from the US spyplane that crashed in China during the Clinton administration).
That's my economic summary for the day.
posted by Chris at
1:44 PM
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