There is much turbulent change in the United States on the political and economic front, with talk of NAFTA being renegotiated, discussion of another government shutdown approaching and the Trump administration presenting the odd spectacle of threatening Canada with a softwood tariff. Yet, some things do remain the same. In the realm of economics, people care most about keeping their jobs. So, why aren’t the record low rates of unemployment (4.5% in March of 2017) having a more positive impact on consumer confidence and public opinion?
No mood for cheer
The US unemployment rate is abig indicator that Americansinterpret as providing an immediate impact on their lives. One might expect that low unemployment would mean a tight labor market with companies competing for a small pool of workers, driving wages up. In the past, that is what has typically happened, but these are not typical times. In February of last year, US unemployment fell below 5%for the first time in eight years. But there was no real celebration of the event. In addition to the rise of income inequality withinflation-adjusted wages having stagnatedsince the 1970s, the economy in general has been moving at a lacklustre pace following the successive crises of the dot-com bubble of 2000 and the real-estate bubble of 2008.
The tale of the tape
US GDP per capitagrew at an astonishingly slow 1.8%in 2016 - compare this to the higher than 3% rate the States saw in 1997. While last year’s growth is higher than austerity-bound Western Europe, South Korea posted healthy 3.2% growth in GDP per capita while the juggernaut of China steamed along at 6.4%. So, while unemployment is indeed hitting decade-low levels, this otherwise good news arrives in the context of a slow domestic economy where demand for goods, services and the labor to deliver them remainsanemic. In this context, an individual having become unemployed will find it much harder than in years past to get back into the job market. Relying on support systems like unemployment insurance and making sure you have a solid unemployment recovery strategy in placebecomes ever more important.
How are your Retention Rates?
A nationwide problem can only be tackled on a business by business basis which is why firms are looking at their own retention rates and why they may or may not have a high employee turnover. Employee disengagement and morale are key to keeping workers in their roles. Companies with high staff turnover often find employee engagement is a real issue. Every employee leaving due to disengagement or communication issues becomes another statistic, contributing to the much larger unemployment issue across the country.
Stimulus strategy needed
With the public eye mostly distracted in the press by the macroeconomic anxieties caused by the rising tide of radically populist rhetoric, the discussion of basic strategies for growth are significantly lacking. As central banks grow ever more wary of keeping interest rates low, the window of opportunity for broad-based stimulus is beginning to close. Acting sooner rather than later to bolster employment and earnings in needed, otherwise demand will continue to slip and constrain growth even further.
