Author: Tim Worstall – Forbes
The weekly unemployment claims numbers are out and they’re showing that Donald Trump sure turned up to take office at the right time. We’re in the middle of streak of low layoffs that we’ve not seen for many a decade, thus the labour market’s strong and much seems, if not quite everything as yet, right with the economy. We should note that things aren’t perfect but almost all of the problems that remain are not to do with the cyclical state of the economy, they’re more structural:
Claims for unemployment benefits rose by 5,000 last week to a seasonally adjusted 239,000, the Labor Department reported Thursday. The increase came after claims had dropped to 234,000 the previous week, the second lowest reading in the past year. The less-volatile four-week average edged up a slight 500 applications to 245,250. That marks 102 consecutive weeks in which claims applications have been below the key threshold of 300,000, the longest stretch since 1970.
And something that we’ve noted here before. Back then, in those 70s of tank tops and bell bottoms, the labour force was about half the size it is now. So the rate of unemployment claims, as opposed to the number, is about half what it was back in those halcyon days:
Fewer Americans than forecast filed last week applications for unemployment benefits, underscoring a vibrant labor market.
Jobless claims rose by 5,000 to 239,000 in the week ended Feb. 11, a report from the Labor Department showed Thursday. The median forecast in a Bloomberg survey called for 245,000 applications. Continuing claims fell slightly.
Not just a low number but also lower than surveyed economists expected.
The number of Americans who applied for unemployment benefits in mid-February rose by 5,000 to 239,000, but they remained at exceedingly low levels that reflect the resilience of a nearly eight-year-old economic recovery.
But of course what we want to know is what does this all mean? The measurement itself is of the number of people who first registered for state unemployment benefits last week. We use that as a proxy for layoffs–people who get fired for cause don’t typically get unemployment benefits. So, this is a measure of how many companies, employers perhaps, are downsizing their activities, closing them down even and letting the labour go. A low rate means that not many people are doing so, a sign of a strong economy.
We’ve also other measures, the unemployment rate itself which we think is at, or at least close to, full employment. And we’ve confirmation of that in that we are seeing wage increases–full employment should mean wages rise, we are seeing wage rises, we tend to think therefore that we’re somewhere close to full employment. That’s a point that’s useful to note, we do think this economy thing is all connected together and so there’s usually more than one way to check whether something is going on or seems reasonable. If this is happening then that over there should be and so we can go look and see if it is.
For example, if we were to say, as the EPI has tried to, that wages have been falling behind productivity these 40 years then we should see the labour share of the economy falling these last 40 years. It hasn’t been (a small amount since 2000, yes, but not the period prior to that) so there must be something wrong with the EPI’s calculations. Yes, I do know what it is too but that’s not my point here. It’s simply that if x then y is often true in economics and so we can look at y to see whether x really is happening.
As here–low layoffs, low unemployment rate, that should mean wage rises and if we weren’t seeing them–which we are–we’d have a puzzle on our hands. Some one or two of our other numbers would need to be wrong to explain why no wages rises.
So, we’ve a pretty good economy then. No, not perfect, but in terms of where we are in the business cycle we’re definitely in an expansion, we’re not in a recession in any manner at all. This means that fiscal policy, that Keynesian stuff of deficits and so on, isn’t the correct policy for us to be considering at all. Rather, any problems we do still have are based on structural economic problems rather than cyclical ones. And thus that’s where we should be turning our attentions.
Like, say, cutting regulation, dissolving much of the licensure restrictions, cracking down upon monopolies and so on and on. As Keynes himself pointed out the time to fix the roof is when the Sun is shining. And that’s really where we are today, the Sun is shining on the American economy, time to get to work.