| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

Follow Finfacts on Twitter

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

Analysis/Comment Last Updated: Jun 6, 2014 - 3:03 PM


Dr Peter Morici: Friday’s US jobs report won’t alter Fed plans to raise interest rates
By Professor Peter Morici
Jun 6, 2014 - 1:26 AM

Email this article
 Printer friendly page
President Barack Obama talks in a hallway with British Prime Minister David Cameron following their bilateral meeting at the G7 Summit in Brussels, Belgium, June 5, 2014.

Dr Peter Morici:  Friday, the Labor Department is expected to report the US economy added 213,000 jobs in May. This is line with the pace so far this year and stronger than in 2013, and the Federal Reserve is likely to follow through with plans to raise interest rates. The labor market remains slack; however, recent consumer price reports indicate inflation is picking up. The Fed will phase out purchases of Treasury and mortgage-backed securities by the end of this year, and feel considerable pressure to raise short-term interest rates in 2015.

These moves will push up rates for mortgage, auto and other consumer loans. However, upward pressure on interest rates should not be enough to derail the bull market for US stocks.

The unemployment rate likely will remain close to its current 6.3%. Well below the 10% recession peak, it largely reflects a lower adult participation rate. Were the same percentage of adults working or looking for work today as before the financial crisis, the unemployment rate would be 10.4%.

Baby boomer retirements are not driving down adult participation—32% are in the labor force today, as compared to 23% 15 years ago. Rising life expectancies, the loss of benefits-defined pensions, and the disappointing performance of most individual investment accounts are all motivating more elderly to work.

Rather, decent employment opportunities for prime working age adults have not kept pace with population growth. The percentage of Americans ages 25 to 54 that has a job is down to 77% from 82% 15 years ago, despite a larger share of women in paid employment.

Shrinking opportunities, especially in manufacturing and the building trades, have hit men hard. One out of six between the ages of 25 and 54 is without a job, and many of them have few prospects for finding desirable employment.

Nineteen million Americans over 25 are working part-time. More elderly in the workforce supplementing retirement savings, and the structure of government benefits and regulations contribute to this phenomenon. For example, ObamaCare and the Earned Income Tax Credit (EITC) encourage low wage employees to work part-time to avoid losing benefits, and some employers are limiting workers to less than 30 hours per week to avoid tougher health insurance coverage mandates.

The loss of manufacturing and construction jobs, and growth in part-time employment reflects a broader shift in the economy to low wage jobs and lower household incomes.

Although the economy has restored all the jobs lost during the financial crisis, businesses in industries paying average wages in the bottom third of all employers have added 1.9 million jobs, about the same number as jobs lost in the top two-thirds. Consequently, since 2007, annual inflation-adjusted median household incomes are down about $5,000.

The root cause of poor jobs creation and falling real incomes is slow economic growth that has bedeviled both the Bush and Obama administrations. Whereas during the Reagan-Clinton era GDP growth averaged 3.4%, since 2000 the pace has slowed to 1.7%.

After GDP contracted 1% in the first quarter, forecasters’ growth expect it to rise at a 3% rate the balance of this year. However growth in the range of 4 to 5% would be needed to provide the 350,000 jobs required each month to bring unemployment down to pre-financial crisis levels over 3 years.

Holding back growth are the trade deficits with China and Japan and on oil, which sap demand for domestically produced goods. Those gaps stem from trade agreements that have exposed US manufacturers to less-expensive imports without opening comparable opportunities abroad for more competitive US enterprises, and the US policy of not developing most of its off-shore oil and gas resources. Altering those policies to cut the trade deficit in half could easily add another one percentage point to growth.

Additionally, new business regulations—such as Dodd-Frank and the above mentioned disincentives to work full-time and hire imposed by ObamaCare—higher taxes on entrepreneurs, and now new regulations to reduce carbon-emissions raise business costs, slow investment and reduce growth.

Balancing growth with other social and environmental goals is always difficult, however, the choices voters and politicians have implemented in this century are profoundly suppressing the number of jobs the economy creates and wage levels.

Additional stimulus from the Fed can’t overcome those constraints and create jobs, and inflation heating up will require it to raise interest rates by mid-2015.

Related Articles
Related Articles


© Copyright 2011 by Finfacts.com

Top of Page

Analysis/Comment
Latest Headlines
Disastrous 44-year War on Drugs and ignoring the evidence
HSBC & Tax Evasion: France/ Belgium issued criminal charges; UK/ Ireland nothing
Analysis: Germany world's top surplus economy; UK tops deficit ranks
Facts do not always change minds - can even entrench misinformed
Finfacts changes from 2015
Facts of 2014: Guinness not Irish; 110 people own 35% of Russia's wealth
In defence of dissent and Ireland's nattering nabobs of negativism
Dreams of European Growth: France and Italy facing pre-euro economic problems
Globalization's new normal needs permanent underclass - Part 1
MH17 and Gaza: who is responsible?
Israel vs Palestine: Colonization set for major expansion
Aviva Ireland's 'fund' runs dry and life cover to die for
We wish Martin Shanahan - new IDA Ireland chief - well but...
Ireland as an Organised Hypocrisy is in lots of company
Dr Peter Morici: Friday’s US jobs report won’t alter Fed plans to raise interest rates
Own Goal: Could FIFA have picked worse World Cup hosts?
Ireland: Spin and spending will not save bewildered Coalition
Irish Government parties set for 2-year vote buying spending spree
European Parliament: Vote No. 1 for Diarmuid O'Flynn in Ireland South
Dr Peter Morici: US April jobs report may show 215,000 added in April
Dr Peter Morici: Hardly time to call Obamacare a success
Celtic Tiger RIP: Change in conservative Ireland six years after crash
Dr Peter Morici: Five things to know about the Fed’s obsession with inflation
In age of acronym/ Google, Trinity to rebrand as 'Trinity College, the University of Dublin’
Hoeness case part of ‘painful’ change for Swiss bankers
Dr Peter Morici: The Cold War was only on vacation
Dr Peter Morici: US economy drags on Obama's approval ratings; Don’t look for changes in Washington
Dr Peter Morici: Bitcoin debacle shatters the myth of virtual money
Dr Peter Morici: US Tax Reform: Eliminate the income tax and IRS altogether
Wealth threatens the simple life in Gstaad, Switzerland
Irish journalists get cash payouts over 'homophobic' defamation claim
Irish academics get lavish pension top-ups as private pensions struggle
Dr Peter Morici: Inequality is President Obama’s highest priority, but solutions are naive
The Finfacts Troika: Better times ahead and a hangover to forget?
Dr Peter Morici: Volcker Rule arrives with the hidden jewel in Dodd-Frank financial reforms
Ireland's toothless fiscal watchdog threatens to bark
Analysis: Germany's current account surplus - - Part 2
The end of western affluence?
Bono's hypocrisy on Africa, corporate tax avoidance in Ireland
France like Ireland is run for the benefit of the old