The U.S. Economy Is in Good Shape!
According to the Wall Street Journal, the U.S. economy is in good shape! We are essentially at full employment, claim some economists who met at the American Economic Association’s annual conference to discuss the state of the U.S. economy and its prospects at the start of a new year.
“The U.S. economy is now in very good shape,” said Martin Feldstein, a Harvard University economist. “We’re essentially at full employment, with the overall unemployment rate at 5%, and the unemployment rate among college graduates a remarkably low 2.5%. Looking ahead, the growth of [gross domestic product] in 2016 will be limited by the absence of excess capacity in the economy rather than by a lack of demand.”
Loretta Mester, president of the Federal Reserve Bank of Cleveland, stated that the “economy has made substantial progress toward the Fed’s goals of maximum employment and price stability—enough progress that in December the [rate-setting Federal Open Market Committee] moved its target federal funds rate up by 25 basis points from essentially zero.” She speculated that monetary policy will “continue to support the expansion.”
However, Columbia University economist Joseph Stiglitz had a different perspective. While he applauds the full employment of college grads, he pointed out that the 5% unemployment rate being cited doesn’t account for large sections of the American labor market that are either unemployed or underemployed (those working part-time who wish to work full-time). This affects inflation, inflationary pressures, and the already sluggish wage growth.
Betsey Stevenson, a University of Michigan economist, agreed that it will be difficult to for the economy to continue to grow since nearly one in five prime-age adults are not participating in the labor force. The 5% unemployed, while a terrific sign of recovery from the recession, “is only a small slice of the underutilized talent in the economy.”
Recent analysis by the Congressional Budget Office reveals that the labor force is substantially smaller than its full employment level. About a million Americans have joined the labor force since September, and another 2 million are expected to rejoin if the job market continues to strengthen. But currently, labor-force participation rates for youths and prime-age adults are still well below pre-recession levels.
In an interesting side note, approximately 5% of all employed Americans work multiple jobs, the vast majority of whom work a primary full-time job and a secondary part-time job. Citing a survey by Indeed, USNews.com says that while many people choose to work part-time for extra spending money or as a hobby, the majority are moonlighting just to make ends meet.
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