Perhaps the US economy is not as bad as it seems after all. After a subpar employment report this week, some of our most prominent economic forecasters are now anticipating a recession. If we can trust any predictions from our own Federal Reserve, then we are in a recession – but that does not necessarily mean a meltdown.
The American economy still looks intact and probably growing at an average rate of two percent this year. Let’s consider some reasons for the discrepancy between economic forecasts and reality.
The unemployment rate continues to be stubbornly high – a sore spot on many of our economists’ watch lists, including US Recession Watch, April 2020 – Recession Odds Artificially Low. The latest figures show unemployment at 10.3 percent. On the one hand, this is far less than the initial estimate of an all-time high of ten percent – and it is significantly lower than where we were in early 2020.
On the other hand, this number is also very poor when you look at other key indicator of the economy. This type of high unemployment means people are losing their jobs and having trouble finding them. A little over half of all working Americans are either “not in the labor force” or are only part-time workers, which means they are never really employed by anyone.
The net gain of jobs is far from “enough” when it comes to the overall economy. Adding jobs doesn’t necessarily equal a healthy economy, even with an increase in production. Perhaps the most important reason is that if you do not have a job, you will not pay your taxes and there is nothing a government can do about that.
All of these economic indicators point to continued joblessness. But if you add up the inflation numbers, they are coming in much lower than they were back in January of 2020. By the inflation measure, the US inflation rate is now in single digits, which is exactly where it was back in January of 2020. Our government is willing to spend money because the prices on everything have come down so much.
What happened? Government spending has caused a gigantic increase in the flow of data – data that is meant to move economies forward, not backward. If we cannot spend money, we can’t create wealth – and that is one of the most important factors that is keeping us in a recession.
US Recession Odds Artificially Low, March 2020 – The whole situation in Washington, DC is still confusing. Everyone is trying to figure out what’s going on and who will pay what. Who knows how the entire story will end?
New unemployment data released on Friday showed that the number of jobless workers increased by six thousand last month. Of course, this is a decrease from the previous month and from the total number of job losses in the past three months. In fact, it was the second consecutive month that more Americans lost their jobs than were added.
The US economy is really a mystery, but that is the case because it is not a major economic problem. There are no “hot spots” – nobody seems to know where the problem is coming from.
US Recession Odds Artificially Low, March 2020 – Looking forward into the future, there are fewer people employed and the number of unemployed is only increasing. This is not a recession, but rather a market correction.
Using US Recession Odds Artificially Low, April 2020 – Recession Odds Artificially Low, we can predict that the unemployment figures will continue to rise at a very slow rate, even if job creation doesn’t catch up with the recent steady pace. or even surpasses it. in a short period of time.