What happens when the unemployment rate drops below 4% - Rick Moran

by Rick Moran

Sounds as if capitalism is working or something.

The current U.S. "official" unemployment rate is at 4.1%, and most economists are forecasting a drop below 4% very soon and possibly below 3% by the end of 2019.
Bloomberg:

U.S. unemployment is primed to fall significantly further and could drop below 3 percent for the first time since 1953, the year central bank chief Jerome Powell was born.
That's according to economists at Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Moody's Analytics Inc. With an already solid economy set to receive a double dose of fiscal stimulus, they argue that a drop in joblessness from its 17-year low of 4.1 percent in February is all but inevitable.
And they say that a break below 3 percent is a distinct possibility – even with the return of some workers to the labor force – especially if Federal Reserve Chairman Powell doesn't do more to slow the economy down.
"We have unemployment at 3.25 percent by the end of 2019," Jan Hatzius, Goldman's chief economist, said in an email. "A decline below 3 percent at some point is obviously possible."

The number of "discouraged workers" who have given up looking for work is dropping like a stone. Those working part-time who want a full-time job are also dropping.

But with labor getting scarcer, what can U.S. businesses do to continue being profitable without sending inflation through the roof? Wages grew at an annual rate last month of 2.1%, which was very good news. And there are signs that wages will continue to grow without putting pressure on prices, which is more good news.

So what will the U.S. look like when unemployment breaks the 4% mark? Bloomberg reporters fanned out around the country, and what they found was encouraging.

What will happen when the U.S. unemployment rate falls below 4 percent, which is expected to occur by this summer? One way to tell is to look at cities where joblessness is already lower than that. Bloomberg News reporters traveled to Iowa, Georgia, and Maine. What they saw there is encouraging. They discovered that employers have found ways to cope with tight labor markets and still make money. Businesses have pulled in workers from the sidelines – including retirees, immigrants, and the homeless – and retooled processes to use less labor. Some have raised pay considerably for certain jobs, but so far there are no signs of an overall wage explosion. That should embolden those at the Federal Reserve who want to raise interest rates slowly to give growth a chance.

The labor shortage has forced employers to innovate and sometimes seek out those who might not have been considered for employment previously:

Lanre Bakare, a 36-year-old Nigerian immigrant, was homeless and had little marketable work experience when he was accepted into a training program run by CobbWorks Inc., a federally funded nonprofit that matches workers and businesses in the construction, logistics, information technology, and health-care fields. Now he earns $40,000 annually as an analyst managing vendors and supplies at residential construction sites in Cobb County, Ga., and the surrounding area. Eleven months into the job, Bakare still marvels at his salaried status and is looking forward to that most dreaded of employment rituals: the performance review. "I'm really excited," he says. "We're going to talk about if they are going to increase my job, what are my possibilities."

Ah, yes, "trickle-down economics" at work. And haven't we been told that the saying "a rising tide lifts all boats" is bogus?
And some employers are scrambling to fill positions:

That's particularly true in the Cobb Galleria and adjacent Cumberland Mall areas, a few miles south on I-75, where office buildings, hotels, stores, restaurants, and a new ballpark for the Atlanta Braves compete for workers. "We've had fast-food restaurants offering bonuses," says Roger Tutterow, an economist at Kennesaw State University. He's also seen signs that labor shortages are constraining certain industries, noting that the number of building permits issued last year was half what it was during the boom that preceded the housing bust, even though demand for new homes is running high.
Several Marietta companies report they're improving benefits to hang on to employees and attract new ones. InfoMart Inc., a 137-person operation that performs background screenings for companies, began paying 100 percent of its employees' health insurance premiums this year, up from 75 percent. It also rehabbed its office space to make it more "collaborative-looking," says Senior Vice President Tim Gordon, who's especially keen to attract millennials. InfoMart also allows its tech employees to work from home four out of five days a week.

So, to sum up, fewer potential workers forces companies to raise wages and benefits while even those who were left behind in the economy previously are benefiting.

I don't know – sounds as if capitalism is working or something.

Rick Moran

Source: https://www.americanthinker.com/blog/2018/03/what_happens_when_the_unemployment_rate_drops_below_4.html

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