Sunday, November 10, 2013

How Healthy is the Labour Market?


The Fed has set a tentative target of 6.5 % unemployment as a sign of a healthy labour market. Note that Mr. Bernanke, seems to suggest that we are still far away from that goal. Note also that new job creation last month was much better than the previous month but unemployment rate went back up to 7.3% .  
Please take some time to reflect on the above chart.
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Federal Reserve Chairman Ben Bernanke said on Friday that there was still an "awful lot of slack" in the U.S. labor market, but cautioned that economic data did not do a good job of providing an accurate measure.

"I think the unemployment rate probably understates the degree of slack in the labor market. I think the employment-population ratio overstates it somewhat, because there are important downward trends in participation," he said in response to an audience question during a panel discussion at the IMF.

"But that being said, I think we would agree that there is an awful lot of slack in the labor market - a lot of young people living with their parents and the like - and that is a very important imperative, and why the Federal Reserve in particular is taking strong actions to support job creation."

Bernanke was not specifically referring to the latest employment report, released earlier on Friday, which showed the unemployment rate rose to 7.3 percent in October.

Bernanke was taking part in a panel discussion that included IMF Chief Economist Olivier Blanchard, former IMF Chief Economist Kenneth Rogoff, former U.S. Treasury Secretary Lawrence Summers, and Stanley Fischer, whom the conference honored. All had been taught by Fischer.
At one point, Bernanke and Summers, who had been a top contender to replace him at the helm of the U.S. central bank until political opposition killed his chances, debated theories of negative interest rates.

That discussion was spurred after Summers delivered a very gloomy diagnosis of why U.S. growth has been so soft since the 2008 financial crisis.
The Fed chief was also asked about the mounting burden of student debt, whose outstanding balances rose by $8 billion in the second quarter, to $994 billion, according to data from the Federal Reserve Bank of New York.

"To the extent that there is a lot of student debt held by people not working, it is obviously another drag on the recovery. I don't see it as a source of financial crisis per se, simply because it is primarily the asset of the federal government," he said. "What it could be, ultimately, is another fiscal cost."
--by Reuters

17 comments:

Anthony Rocco said...

At first by looking at the chart, we can see an obvious correlation between recessions and unemployment, during recession years the unemployment rate shoots up tremendously. In non-recession years, unemployment steadily but slowly decreased. Those stats lead me to believe that the labour market is weak and not healthy. And especially with the slack that Ben Bernanke stated in his response to an audience question, it further leads me to believe that the labour market isn't that healthy. Another big thing is the student debt. For the debt to jump from 8 billion to 994 billion is just insane, i don't think the student debt would rise like that during a healthy labour market, that is what leads me to believe its not healthy.

alexa piccoli said...

The labour market is not healthy. Unemployment rates have increased over the past years and are not getting better. Many people who are graduating with college degrees are not finding jobs because they're aren't any to find. They are not making enough money to move out and increase the economy but instead living with their parents. Along with this, student loans that have not been paid off rose for 8 billion to 994 billion. Students who graduate who cannot find jobs cannot pay these loans back. The labour market is not helping itself in any way and jobs need to be created to get the labour market back on track and jumo start the economy

Mary O'Shea said...

This article tells its readers how well the labour market is doing. After observing the chart, the readers can conclude that during times of a recession unemployment rates increased an immense amount, leaving many people without work and struggling to make a living. Therefore, our labour market is not doing well. Not only this, but the largest debt source in our economy right now is coming from student loans. Their debt has increased from 8-994 billion dollars! Due to the fact that unemployment may be low when students are graduating college, it causes a domino effect in the sense that then these students cannot pay back the banks the money they owe them on their student loans. We need to make our economy more productive and stable by decreasing the unemployment rate, by creating jobs for people. Even if it is road work, etc. people need to have the option to earn money, or our economy will collapse leaving millions of people in poverty.

Ashleen Ulysse said...

The biggest thing that stood out to me in the article is the student debt. The fact the the debt skyrocketted from 8 billion to 994 billion is beyond words to me. This is a major reason for why our labour market is not healthy. And not only that, the unemplyment rates increasing tramendously in times of recession makes it difficult for these college students to pay back loans.So the tie between recession and rates of unemployment are evident.

Kenneth Reilly said...

The labor force appears to be fluctuating heavily currently. The chart shows the relationship between unemployment and recessions. Currently unemployment is slowly getting worse which is leading to economic instability. Student loan debt is going through the roof currently. Students who just graduated from college seem to be having the ultimate dilemma of having massive debt and no job available. This is hurting our economy in many ways. For example, these students graduating from 4 year colleges are looking to find a job so they can buy a home and start a family. Not being able to find a decent paying job is hurting our housing market because these people end up just staying home with their parents. Overall the economy is very weak and this problem needs to be fixed immediately.

Rich Gordon said...

The unemployment rate in the United States has improved since the financial crisis of 2008, but we still need much more improvement to be back to normal. A healthy unemployment rate is around 6.5 percent but right now it is way above that. The national statistics says unemployment is around 7.3 percent but it is much higher than that. This is because of the people that do not want to get a job. They stop looking for a job and think there is no hope. These people dont get calculated into the average. A good job market does great things to the economy. This is why the government is trying so hard to create jobs around the country. Student debt is another major problem with the job force. Many students with huge amounts of debt are not working so the process drags on and on.

Colby Stover said...

The chart shows how unemployment rises when in a recession. Unemployment slowly decreases as the nation starts leaving a recession. More jobs must be created by the government in order to pull a nation out of a recession. Money must be put in the pockets of the people so they spend that money and the economy flows. Also, a low unemployment can be good for the economy because more people will be working and making money. If unemployment is low, people will spend their money and help the economy. Low unemployment can be good for the economy which could be good for the national debt, which has soared from 8 billion to 994 billion.

Dominic Gomez said...

The unemployment rate is a problem that the general population is well aware of, everybody is also aware of is the increasing financial cost of higher education. What some people are unaware of, or what they are refusing to comprehend, is the decreasing benefit from that higher education. The belief is that if you go to college, and work hard, you will be rewarded. That is not the case nowadays. People graduate, tens of thousands of dollars in debt, unable to find a job that matches their skills, or any job at all. the "mounting burden of student debt" is caused by the unemployment rate.

Nicholas Beato said...

The unemployment rate in the United States isn't looking too good. The rate of unemployment seems to go up when the country is in a recession. This is possibly the worst situation for American people because when times are bad with society, people are losing their jobs on top of that. The labor market is doing very poorly cause of this. It states in the article that student loans seems to be the biggest debt source in the economy. Although having an education is very important, something needs to be done to help these college students like myself. The article states that the debt went from 8 billion to 994 billion. Its a shame because kids who leave college cant find jobs when they get out. As a society we need to decrease unemployment so people can get jobs and not bring the economy closer to poverty.

Joanna Pizzurro said...

America's unemployment rate has fallen steadily, and surprisingly rapidly given subpar growth, since peaking at 10%. It is increasingly clear that this trend overstates the health of the American labour market. Employment has been growing but not fast enough to raise the percentage of Americans working, which has been stuck at just under 59% since late 2009. Much of the improvement in the unemployment rate has instead come down to a drop in the share of working-age Americans counted as in the labour force: actively looking for work.

Matthew Ramos said...

How healthy is the labor market? I believe that at an estimated 7.3% (probably closer to 7.5%) the labor market is in an unhealthy state. In the article, Bernanke states that to consider the labor market healthy, unemployment would have to decline to 6.5%. Although considered unhealthy, the labor market has been improving, even though many economists would consider the improvement to be rather slow. Slow improvement is still an improvement and it shows that we are heading in a positive direction as far as creating jobs is concerned. I believe the real problem lies with the underemployment factor rather than the unemployment factor. More jobs are being created but the quality of jobs has been diminishing. Workers are not being properly compensated and these workers have become overworked and discouraged. It seems that more jobs are being created, and statistics over the last two months shows an upward trend. But the quality of jobs needs to also increase to get the labor market into a healthy state.

Kenneth Belle said...

Based on my perception of the graph the Labour Market seems at a steady rising coming off of the recession. Which is a positive, also meaning that it is "healthy". Also in the end it talks about the student debt, having students taking classes and aren't working, so you would need to put that into consideration of the fact that there are still many unemployed.

Kristoff Kolodko said...

Unemployment rates have increased over the past years and we can all clearly see this. The article sparks a remark, saying that our labour market is "slacking" due to the fact that many out college students go back and live at home with their parents. I thought this was a rather odd remark especially since the high rent prices in the tri-state area and the low starting wages of many first year jobs it makes it close to impossible to live in anything livable, let alone living alone. The fact that many college graduates feel comfortable and are accepted back home while they save money during their first few years in the labor force is nothing but smart. We in fact, being in the the tri-state area have such a competitive labor force. Also, if you think about many college graduates graduate with student loan debt, low wages, and high living expenses, living at home is the only option. Students are not allowed to default on their student loans, they cannot declare "bankruptcy" on their loans and stop paying, they need to take a job they can get and pay off their very expensive education investment.

Kristoff Kolodko said...

Unemployment rates have increased over the past years and we can all clearly see this. The article sparks a remark, saying that our labour market is "slacking" due to the fact that many out college students go back and live at home with their parents. I thought this was a rather odd remark especially since the high rent prices in the tri-state area and the low starting wages of many first year jobs it makes it close to impossible to live in anything livable, let alone living alone. The fact that many college graduates feel comfortable and are accepted back home while they save money during their first few years in the labor force is nothing but smart. We in fact, being in the the tri-state area have such a competitive labor force. Also, if you think about many college graduates graduate with student loan debt, low wages, and high living expenses, living at home is the only option. Students are not allowed to default on their student loans, they cannot declare "bankruptcy" on their loans and stop paying, they need to take a job they can get and pay off their very expensive education investment.

Maria Biondi said...

This article immensely talks about the unemployment rate growing during times of a recession. You can conclude from this that the labour market is not doing well. Another negative aspect of our economy is the amount of student loans that are accumulating. College graduates are getting out of college and not being able to find jobs with a supportive enough salary in order to pay their student loans back. The economy has many jobs available but the quality of these jobs are much less than they use to be. For example many job openings are part time and with low wages. Yet, college graduates are taking these jobs since they can not declare bankruptcy on their loans. So these part time jobs are the best they have and they use this money to pay off their student loans with.

Christina Sassone said...

In this article, the US seems to be doing well by the increase in the job market. However, history shows that we are no better off now then we were before. The labor market is not healthy. In fact even with the creation of new jobs, the unemployment rate was still increased. Student loans is another big issue affected todays economy. Today students are more likely not to attend school because of the cost and this is making it harder for them to get jobs. Most jobs require a degree. If a student takes out loans, it is impossible for their jobs to give them enough money to pay off the student loans.

Matt Corrie said...

This article discusses another problem that the united states government is facing. Unemployment rates have increased over the past few years. A reason for this is because the labour market is "slacking" because a lot of college students are going back home and moving back in with their parents. These college students attempt to find a job but are not able to find one and they have no other choice but to move back in with their parents. Even though the government has created new jobs the unemployment rate is still increasing. Due to the fact that these college students are not able to find jobs the large amounts of money owed back from student loans are not being paid off. This is one of the main reasons why the united states debt is so high. All in all the United States unemployment rates are a big problem and the government needs to find a way to help college kids find jobs right away and this will help pay back some of the debt that is owed.