What Next for the US Economy :Introduction

Friday was a good day for the United States. The Bureau of Labor Statistics (BLS) released the jobs numbers for the month of May. Before the data was released, the president broke protocol and sent a tweet about the jobs numbers. The tweet did not reveal the exact numbers but it did reveal the sentiment of the numbers because the president receives the numbers in the evening before the official release.

The headline of the numbers was that the unemployment rate dropped to 3.8%. This was the lowest rate since the early days of the dot com bubble. In May, more than 233K people were employed, which was higher than the expected 186K. In addition, wages grew at 0.3% which was a faster rate than what was expected. The participation rate among all the groups was also good.

The numbers provided a boost to the US economy but was not unexpected. Recently, the news media has talked about the current situation in the job market in the country. A recent report showed that in Elkhart, Indiana, hundreds of jobs were yet to be filled. Managers in the city are having the challenge of filling new jobs because of inadequate workers. Another report showed that BNSF, the large railroad company owned by Warren Buffet was paying more than $25000 in sign up bonuses to people. They are doing this to attract more people. There are more than 2 million vacancies in the US.

As the economy continues to grow, there are concerns about its health. The main challenge right now is that the economy does not have enough people to employ. In fact, the Trump administration recently ‘imported’ more than 150K people from other countries to help fill the gaps. Another issue is that more people have no reached the retirement age. The ratio of the population to people aged more than 55 years has soared to more than 22%, which is double than where it was 20 years ago.

The challenge for the US economy and the Fed is that the Philips curve is not working. In economics, the Philips curve states that the rate of inflation rises as the rate of unemployment goes down. The logic for this is simple. As more people gets employed, the price of items too rise because they can afford the products. However, this is not happening. The unemployment rate has fallen steadily in the past few months but the inflation rate has remained below the target of 2%.

What Next for the US Economy :UsefulTips


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