Leadership

Unemployment numbers signal economy improving: case study Houston

on

Operation timed out after 10001 milliseconds with 0 bytes received


As vaccinations continue to be administered and stimulus funds continue to be dispersed, unemployment numbers across the United States are starting to see a slight improvement. In the Houston-area, a metropolitan region with nearly seven million people, the unemployment rate currently sits at an even eight percent, down one-third of a percent from March. It’s a far cry from the peak last summer, in which the Houston unemployment rate reached 14.40% but remains roughly two percent higher than the long-term average.

Signs of ongoing economic and financial distress are everywhere, even if the overarching trends are positive. For instance, financial services like Strategic Consulting have seen a spike in debt consolidation applications and short-term lending. Tourist and recreational spending is down, debt levels are up, and Americans are reluctant to put faith in better days ahead. The result is a continued reduction in economic activity, giving businesses no choice but to lay off workers and roll back hours.

Simultaneously – and perhaps paradoxically – fast food businesses across Houston are struggling to hire and retain enough employees to fill their weekly schedules. The owner of a McDonald’s in Florida recently announced he would pay people $50 to show up for interviews. Talk about a hiring bonus. The problem is, few people have been willing to take the bait.

Are unemployment numbers tied to the stimulus?

Many pundits and critics blame the loosening of unemployment compensation laws for the understaffing challenges seen in the foodservice industry. Why would someone work if they can get paid to do nothing?

However, such criticisms seem to attack the issue of unemployment numbers from the wrong end. Rather than point fingers at people for choosing unemployment benefits over paychecks, they should be wondering why so-called essential workers are paid so little. Indeed, why would someone work for the same amount of money they could get from staying home? To make it worth it to work, businesses should pay more.

The “argument” against paying workers more is that it would put hundreds of small companies out of business. But if paying a living wage means you can’t make a profit, then perhaps you should rethink your business model? Or, maybe not be in business at all?

Then there’s the issue of automation. 2020 forced hundreds of businesses to invest in automated services and cloud-based platforms. The money has already been spent, which means the jobs these upgrades have replaced will no longer be there anymore. Countless men and women who previously made a living operating the fragrance counter or front desk will be unable to find work or struggle to earn enough money to pay the bills.

The recent purge of low-wage jobs has echoes of the 2008-2009 financial crisis, in which millions of people lost jobs they never got back. However, the jobs made obsolete this time around are not the high-paying factory and administrative positions slashed over a decade ago. The jobs lost today are predominantly entry-level and low-skill in nature. Any jobs created over the next decade will be the opposite in scope, requiring specialized knowledge and expertise.

Getting the Houston-area unemployment numbers back to pre-pandemic levels is unlikely to happen. That’s because there will not be enough jobs to go around. With this in mind, efforts to get the unemployment rate below seven percent are in vain. The days of sub-four-percent unemployment are over. For Houston and other major cities to manage the aftermath without going through a decade-long economic depression, they’ll have to rethink what it means to provide welfare assistance to those in need. What’s more, they’ll have to set their sights on the work prospects of the future, which are predominantly specialized and technological.

The US economy overall created more jobs than expected in June . Nationwide, 850,000 jobs were added from Friday, according to the US Department of Labor. The unemployment rate rose slightly compared to the previous month by 0.1 points to 5.9 percent.

Analysts had only expected an average increase of 720,000 jobs. A particularly large number of jobs have been added in the leisure and hospitality industry, in education and in retail, it said. Analysts had expected the unemployment rate to fall to 5.6 percent on average.

There was a major setback in April: only 266,000 jobs were added outside of agriculture. Experts had expected an increase of one million. The situation then improved in May – with an increase of 559,000 jobs, many of them in the hospitality industry.

US President Joe Biden had spoken of “great news” in view of the May figures – and of “historic progress” on the way out of the economic crisis. The pandemic hit the US economy hard: Employment collapsed at a record pace in spring 2020. Since then, the job market has recovered , but there are still many Americans without a job.

The recovery in the job market goes hand in hand with the economic upswing and the vaccination campaign, which now offers 150 million Americans full protection against Corona. But even if the economy is running smoothly again, a good 6.7 million jobs at pre-crisis levels are missing.

More orders for US industry

There is also positive news from the US industry on Friday: Orders rose 1.7 percent in May compared to the previous month, as the Department of Commerce announced. Economists had expected an increase of 1.6 percent, after a revised decline of 0.1 percent in April.

The US trade deficit widened in May due to rising imports. The deficit climbed 3.1 percent to $ 71.2 billion, as the Department of Commerce also announced. The reason for this was that goods imports rose by 1.2 percent to 234.7 billion dollars than exports by 0.3 percent to the record value of 145.5 billion dollars. Economists had largely expected this.

The US economy has recovered significantly. The International Monetary Fund (IMF) is significantly increasing its growth forecast for the US this year to 7.0 percent due to unprecedented fiscal and monetary support. In April, the IMF was still assuming economic growth of 4.6 percent for 2021.

The unemployment numbers influence the work of the central bank

A sustained recovery on the job market is an important prerequisite for the central bank to be able to reduce its start-up aid for the economy ravaged by the corona pandemic in the foreseeable future.

Fed chief Jerome Powell intends to continue the loose monetary policy until substantial further progress has been made on the way to full employment and price stability. He made it clear early on that this would require positive signals from a whole series of labor market reports before the central bank can consider lower doses of its monthly cash injections of 120 billion dollars.

About Hillary Cray

hillaryc@thebusinesswomanmedia.com'

Hillary Cray is a longtime commentator on women in politics.

Recommended for you