The President of Federal Reserve Bank of Chicago came to speak at the CFA Society of Iowa Strategy Dinner last night and I was lucky enough to attend. Although, we did not learn anything really new from the speech, Evans nicely summarized the Fed’s motivation for implementing the unemployment and inflation thresholds that are his namesake along with the reiterating that the Fed will not remove accommodation, whether it be QE or the near zero federal funds rate too quickly. His view on the economic growth was pretty optimistic. Evans stated,
I am optimistic that we have appropriate policies in place to help the economy achieve escape velocity by 2014. So, after rising a disappointing 1-1/2 percent in 2012, real gross domestic product (GDP) should increase in the range of 2-1/2 to 3 percent this year and then grow between 3-1/2 and 4 percent in 2014, according to my forecast. This growth ought to be sufficient to bring the unemployment rate close or maybe even a little below 7 percent by the end of next year.” Read more
Back on Valentine’s Day, I posted about the link (or lack of one) between a proposed hike in the federal minimum wage and unemployment levels. I know…not a very romantic post for Valentine’s Day. I got several questions, so I thought I’d expand on them and do a couple follow-ups with a bit more information. To recap, basic economics would suggest that as the minimum wage increases (the price of labor), the consumption of labor (employment rate) would decrease as employers consume less of it. The problem though is that a good deal of research shows that this relationship doesn’t exist.
In my initial post, I referenced Washington and Oregon as two states whose minimum wages were already above or near the proposed $9/hour federal minimum. So the question is…how have they been doing? Has that higher minimum wage meant higher unemployment? Read more
Last week, we put out a 2013 economic outlook. Our take on the U.S. economy is fairly positive…if the U.S. government can avoid the nastiest parts of the fiscal cliff. So let’s say that Republicans and Democrats can come to a solution, and the United States manages to avoid recession in the first half of the year. As the U.S. economy keeps improving in 2013, the unemployment rate should keep dropping, right? It’s dropped from 8.8% last November to its current level of 7.8% in about 12 months.
Well, as we get into 2013, don’t be too worried if that pace seems to stall for a while…at least, don’t worry that the recovery has stalled. Read more
Today, the Federal Reserve announced that it will keep its foot on the easy-money pedal until the unemployment rate drops below 6.5% or inflation looks to go above 2.5%. The proposal has been getting some press as of late (you can see my recent post after Fed Vice Chair Yellen brought up the idea in November). This is almost exactly what Chicago Fed president Charles Evans proposed back in 2011. Well, Evans has evidently convinced everyone else at the Fed. Read more
As we now know, the drop in the U.S. unemployment rate to 7.8% was driven by a big jump up the estimated number of employed people – 847,000 according to the Bureau of Labor Statistics. It might be worthwhile to look a couple of the factors that influence that number. It’s worth noting too that these factors might not be mutually exclusive.
1 — A big jump up in the number of people taking part-time work for economic reasons – this was up by over 500,000.
2 — An increase of over 300,000 in the seasonally adjusted employment rate for 20- to 24-year-olds (covered very thoughtfully by Catherine Rampell over at the New York Times blog Economix). Typically, from August to September the number of employed 20- to 24-year-olds drops as college kids give up their summer jobs to back to school. In fact, employment for 20- to 24-year-olds has increased only two other times since the employment series started in 1948. In addition, from July to August, in the non-seasonally adjusted data, the estimated number of employed 20- to 24-year-olds dropped by 530,000.
Remember today everyone. Today’s the day that the unemployment rate fell below 8.0% in the United States. At 7.8%, this is the lowest unemployment rate since January of 2009. Don’t get me wrong, the economy has still got a long way to go, but you’ve got to admit that it feels good to see that number tick down. And the best part is…the unemployment percentage dropped not because people were giving up the search and dropping out, but because they were getting hired.
Here’s what it looked like according to the data release from the U.S. Bureau of Labor statistics (you can read their full report here). There was in increase in total nonfarm payroll employment during September of 114,000, while the unemployment rate notched down from 8.1% to 7.8%. This is based on the so-called Household Survey, where the BLS calls around to about 60,000 households every month to find out if people have been working, have been looking for work, or aren’t working.
When danger threatened Metropolis, mild-mannered reporter Clark Kent dashed into the nearest phone booth to change into Superman. When the U.S. economy begins to stall, inflation-hating hawk and president of the Minneapolis Fed, Narayana Kocherlakota, runs up to Ironwood, Michigan to transform into a monetary-policy dove.