For Mark Roberts’ Use: Evaluating the state of the economy involves many factors, with the unemployment rate being one of the most critical. In 2017 we received the good news that our nation’s unemployment rate has dropped to just 4.4 percent… So let’s break down what that means, and what it doesn’t mean.
The good news: The last time unemployment bottomed out at 4.4 percent was back in May of 2001. The US economy had been growing by more than 4 percent annually, for four straight years, thanks in large part to the dot-com boom. During this time, the federal budget even ran a surplus. Clearly, we are doing better than we have in at least a decade.
What needs to happen next: Low unemployment is a great sign, so why isn’t the economy growing faster than it currently is?
One factor is that, while US employers have added 16.3 million jobs since 2010, many of those jobs are in lower-paying unskilled occupations such as the leisure and hospitality industries. Manufacturing jobs that were lost in the recession are possibly gone forever, shutting many blue-collar workers out of the economic recovery. Chances are slim that those jobs, now either automated or filled in foreign countries by lower-paid workers, will be returning.
However, with the labor market tightening, employers may become more competitive. Experts predict that wages will be driven upward, although it can be difficult to determine how much of an average pay increase we will see.
Currently, low wages and high healthcare costs are pushing against consumer spending, and corporations have been reluctant to reinvest their profits. Plus, with much of the country’s workforce aging, productivity is a concern.
The bottom line: Things are looking up, but we still have work to do. In the wake of large-scale tax reforms, 2018 will be an interesting year to watch and see how everything plays out.
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