Jobless Claims Reach 8-year Low
Labor Market Strengthens
Fed Chair Warns- May Raise Interest Rates
William Raymond Collier Jr- Lower than expected jobless claims were cited by Federal Reserve Chairman Janet Yellen as reason enough to raise interest rates sooner and more rapidly. While the report is positive for those seeking jobs, the numbers could result in lower profits and higher interest rates for Wall Street. A weak labor market would keep the cost of labor down and interest rates low.
For the last 5 months, we have seen 200,000 new jobs each month, or a million jobs total since March. Up until 5 months ago, the level of participation has been historically low, but with last week’s new jobless claims down to 284,00, a number not seen since February 2006, the level of participation in the work force is bound to rise.
These numbers can be revised, for instance, the prior week’s claims were adjusted upwards by 1,000. The total number is still 60,000 lower than predicted by economists. Critics of the President have tried to look for the dark lining in the silver cloud, but these numbers seem to reflect an authentic jobs market recovery, a fact that is bound to help the Democrats in 2014 if the trend continues.
Critics of immigration reform point out that legalizing 22 million new job seekers might offset any gains currently being seen. These new, legal job seekers, the theory goes, could flood the labor market with low skilled workers who accept lower wages than average American workers, thus taking up the new jobs and returning the labor market to a status quo that favors employers over workers.
This possibility might explain why the US Chamber of Commerce is pushing for unlimited amnesty, or at least a “path to legalization” to “legitimize” the millions of illegal immigrant workers employed by so many American businesses in order to keep labor costs down.
The initial increase in labor cost paid by American businesses who currently employ illegal immigrants for sub-minimum-wage rate would be offset by the overall lowering of the cost of labor as the supply of job seekers would be higher than the availability of jobs. In job markets in which the supply of job seekers is greater than the availability of jobs, the wages of the worker is lower.
The countervailing view is that the influx of new, legal labor will be needed to meet the demands of what promises to be a rapidly expanding jobs market. Without these new, legal workers, these proponents argue, there would be shortfalls in the labor market.
The key principle from a purely economic perspective is to balance the labor pool with the jobs pool. Whenever there is too great an imbalance between jobs and job seekers, economic downturns are sure to follow.
These numbers indicate that the labor market recovery might be gaining traction, which could result in an unemployment rate of 6.1% without the necessity of burying the other telling number, the percentage of adults actually seeking employment. This alone could mean the growth of good paying jobs for working people is beginning now.