Let’s talk about the current labor market in the US. I mentioned several times in previous of my articles that the job market in the US seems to be very good. A lot of jobs are being created and companies are struggling to fill these positions. In July the report was amazing with numbers exceeding the expectations. But after looking at the data closer and getting some other inputs, I think we need to discuss the current narrative about the strong labor market and the imaginary recession.
Unemployment Metric
In the following Link you will find that there is a difference in metrics that the US government is reporting. The main difference is basically between the U3 metric that is being reported and the U6 metric that should be reported to get the whole picture. While the U3 only provides the numbers of actively searching individuals the U6 also includes unemployed people who are discouraged or do not actively search for a job anymore. This can have several reasons, one of them being certainly that people are getting a different mindset towards work in general.
Anyways, so would it not be smarter to look at the whole unemployment rate rather than just look at a small portion of it? Well, somewhere around 1970 this was the case. After that time something changed and the government changed the report numbers to the more favorable U3 metric. In the same time they also changed the inflation measurement into this new basket system with replaceable goods. So is everything bad if so many new jobs are still being created and apparently also filled?
Strong Economy?
Does this mean that the US economy is not as much in trouble after all? I would argue exactly the opposite is the case. All of the new jobs that are being created are majorly part time-jobs that are paid very bad. What a strong economy needs are full-time jobs that are being paid well. Most of the people that have taken said created jobs, have most of the time a job already and that is their second or in some cases third job that they are taking!
If people who need the money being forced to take additional jobs. Is this a sign of strong economy? If retired people can not afford to live from their pension and have to go back to work at Wallmart, is this a great sign of a strong economy? Or if highschooler have to drop out of school because they need to help to bring food onto the table, is this a sign of a strong economy? I would highly disagree with that. The same people have often to take on some debt, but is this not good for the economy?
Debt Going Up – Good Sign?
I would immediately say NO! The current narrative in a lot of media is that the more debt is being taken on, the healthier an economy is. They assume that people are confident to pay off this debt as they have good paying jobs. Furthermore, there is the assumption that people are taking on debt to buy goods like cars or TVs. I would again disagree.
The majority of debt is to cover for the simple necessities of life. Many people have to take on debt to provide for food and gas or even to have a roof over their head. With this being said, who would you say is in trouble if you meet them after 10 years. A high school buddy who has debt all over him as well as having a third mortgage on his house or the high school buddy who has no debt and can pay everything in cash? I would argue the first friend is highly in trouble while the second friend has a very solid economic foundation. This is why debt should never be an indicator for a great economy.
Conclusion
I think that we have to buckle up in the next months. While the main narrative might be sunshine and rainbows, it could change very drastically. I would even like you to draw a very dark future suggestions. I am not saying that this will happen but I think right now everything is possible. Imagine the government will put out a program that forgives every kind of debt that people have. All they have to do is comply with a new banking system: the CBDC. I think this would bring a lot of agreement in the lower class areas of the society as they would be debt free and the government would look like the savior. The only problem is that us, crypto enthusiast, will know that this could be a step in the very wrong direction.
Published by ga38jem on
LeoFinance
On 21st August 2022