Monday, December 27, 2010

The Economy and Labor Market in 2011


Here is a link to a story that NPR's Tamara Keith did for last Sunday's Weekend Addition.

I am cautiously optimistic about the economy's recovery. The new stimulus will help the recovery accelerate, but its impact may not be as large as predicted. We have several drags on the economy:

-State and local governments are doing "anti-stimulus". Due to balanced-budget requirements, they are raising taxes and/or cutting expenditures.
-Many home owners remain underwater or have lost a serious amount of equity in their homes. As a result, they will continue to be cautious about spending money. Further, many can't move to areas where job are available.
-Along with the 15 million Americans that are searching for a job, we have an unprecedented 9 million Americans who are working part-time, but want full-time work. Creating a large number of jobs without stoking inflationary fears will take time.

Let's end the year on a positive note. In 2010, the labor market turned the corner:

-Private sector job creation occurred in every month.
-Growth in temp employment, a precursor to full-time job creation occurred in every month except one.
-Increases in hours worked, also a precursor to full-time job creation occurred.
-Retail sales during the Holiday season are up from the previous year!

In 2011, with the second stimulus' help, the labor market will accelerate out of the turn.
Happy New Year!!!!