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The Daily Signal
January Job
Growth Shows New Normal in US Economy
Salim Furth
February 05, 2016
American employers created 151,000 net jobs in January, reflecting an
economy that is growing, but below its previous trends. The Bureau of
Labor Statistics also reported that participation in the labor force
was 62.7 percent, higher than the previous months but lower than the
January, 2015, level. The best news was that average hourly wages rose
12 cents over the previous month to an all-time high of $25.39.
Unemployment ticked down to 4.9 percent, the first time since February,
2008, that it has been below 5 percent. Regrettably, the average
duration of unemployment rose to 28.9 weeks, far above pre-recession
levels.
Other economic indicators suggest both that the U.S. economy has failed
to return to the pre-Great Recession trends and that liftoff is not
about to take place.
After a disappointing fourth quarter, gross domestic product finished
2015 just 1.8 percent higher than its 2014 close.
According to the Congressional Budget Office, total U.S. output is
still 2.4 percent below potential, essentially unchanged from the
previous year. And the “output gap” would be significantly larger
relative to CBO’s earlier projections of potential output. As the
mediocre recovery has continued, expectations have eroded.
Manufacturing output in the U.S. (measured by the value of durable
goods shipments) stalled out in mid-2014 despite low energy prices. The
share of the labor force working part time for economic reasons has
been declining, but is still well above pre-recession levels. One of
the bright spots in the recovery was the number of job openings, which
grew rapidly until July 2015, but has receded slightly since then. The
quit rate – which indicates how confident workers are about their
chances of finding new employment – is slightly below its pre-recession
level.
Some economists are calling this new normal “secular stagnation”.
However, that does not fit the facts. In secular stagnation, the
economy would be in a near-zero growth environment, with troubling
implications for investment. In the current environment, the economy is
growing, but at a lower level than anticipated. This can be explained
by the introduction of major new regulations on bank lending –
Dodd-Frank – and a deepening moat of regulations, Obamacare first among
them, which protect incumbent firms and allow them to earn monopoly
profits.
Since the early 20th century, the United States has been at the cutting
edge of economic growth, enjoying new inventions and implementing
better business practices a few years before other countries. But that
place is not guaranteed. As U.S. economic freedom slips behind
countries like Switzerland, Canada, and Singapore, those countries may
move into pole position, making the most of new technology and allowing
workers to maximize their income.
To make America great once more, Congress, the administration, and even
state and local governments need to repeal costly regulations that make
it harder to borrow, harder to invest, harder to switch jobs, and
harder to get a good education.
Read this and other articles at The Daily Signal
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