The current state of the economy remains perplexing to many. Relying solely on government statistics for clarity often leads to more confusion than insight. The numbers presented by authorities frequently raise more questions than they answer, leaving observers scratching their heads.
For example, last Friday, the Labor Department announced 204,000 new positions were added in October. At first glance, this appears encouraging. However, the real inquiry lies in the nature of these jobs and whether they will enhance household earnings.
Of the new jobs reported, 53,000 were in the leisure, hospitality, and restaurant sectors. While any job growth is preferable to stagnation, these positions often lack the long-term stability and wealth-building potential that families seek.
To complicate matters further, the unemployment rate actually rose from 7.2% to 7.3%. This raises an eyebrow: how can this occur while new jobs are being created?
According to The International Business Times, the discrepancy between payroll and household surveys explains this phenomenon. The payroll count considered furloughed federal employees as part of the workforce, while the household survey classified them as unemployed.
During the government shutdown, approximately 800,000 federal employees were furloughed. Yet, by the time the household survey concluded, about 350,000 had returned to work. This odd situation clarifies why the unemployment rate increased despite the addition of over 200,000 jobs.
A Big Fat Question Mark
Another concerning aspect of the report is the labor force participation rate, which dipped 0.4% in October to 62.8%. This marks its lowest level since 1978, around the time when women began entering the workforce in larger numbers.
Overall, the jobs report has left analysts with more questions than answers. Is the economy expanding or merely stagnant? It’s hard to say.
Another economic indicator released last week—the gross domestic product (GDP) report—further muddied the waters. Initially, it seems that things are looking up, as the Commerce Department announced the U.S. economy grew at an annual rate of 2.8% in the third quarter, an increase from 2.5% in the previous quarter.
However, a deeper look reveals that 0.8% of this growth came from businesses increasing their inventories. “When inventories build up, it can signal two very different scenarios,” states CNNMoney.
“Either businesses anticipate a rise in demand and stock up in advance, or demand is falling short and products are simply accumulating on the shelves.”
So, which interpretation is accurate?
Tomato Economics
We will have to wait for fourth-quarter GDP numbers to provide further clarity. However, there’s a chance that inventory growth may falter in the upcoming quarter, making it harder than expected to clear stockrooms, even with the holiday shopping season approaching.
So, what conclusions can we draw from this tangled mess?
At the Economic Prism, we are always on the lookout for insights that deepen our understanding—not just because it makes us knowledgeable, but because, ideally, it will lead to greater wisdom.
It is essential to recognize that knowledge and wisdom can operate oppositely; the wiser we become, the less we cling to mere facts. Real experiences often replace pure knowledge with wisdom, provided we listen more and talk less.
In the words of the late British journalist Miles Kington, “Knowledge is knowing a tomato is a fruit; wisdom is not putting it in a fruit salad.”
When it comes to the economy, the current jobs and GDP reports offer a diluted kind of knowledge. However, we advise against using these figures as a sole basis for decision-making. If you truly wish to gauge the economic climate, look around you—observe what you experience directly.
From our perspective, the economy appears to be steadily moving forward, occasionally hinting at improvement. Yet, there lingers a sense of impending trouble. Therefore, while we remain cautiously optimistic, we also recognize the uncertainty: Are we witnessing genuine recovery, or are we on the verge of decline, similar to a tomato changing from ripe to rotten?
Sincerely,
MN Gordon
for Economic Prism
