October 3, 2013
LIA's Monthly Economic Report: US Economy Demonstrates Modest Improvement
By: Dr. John A. Rizzo
The US economy has continued to demonstrate modest improvement, particularly in the housing sector. The unemployment rate again fell in August 2013 to 7.3%. However, this largely reflected a decline in labor force participation. Consumer spending has shown mixed results, and retailers are anticipating slower growth in holiday sales than in recent years. Inflation has remained low, at an annualized rate of just 1.5%. Given the fragile nature of the economic recovery and little inflationary fears, the Federal Reserve Bank has indicated that it will continue its pro stimulus bond purchases. This should help bolster equities markets and promote further economic recovery. However, the recent government shut down threatens economic recovery, especially if it persists. The potential public default if the debt ceiling is not raised poses even more serious economic consequences. Negotiations with Syria rather than a retaliatory strike should help to stabilize economic conditions, at least for the near term.
The economy added an estimated 169,000 jobs in August, as the unemployment rate fell to 7.3%. However, the decline in this rate largely reflected a drop in labor force participation. Just 63.2% of Americans currently participate in the labor force, meaning that they are employed or seeking a job. This is the lowest rate since August 1978. Moreover, jobs added in June, originally reported to be 162,000, have been revised downward to 104,000. Continuing a trend, many of the jobs added came in lower-paying sectors, with gains of 44,000 jobs in retailing and restaurants and bars adding 21,000 jobs. Health care gained 33,000 jobs. Professional services and manufacturing added 23,000 and 14,000 jobs, respectively.
Real wages in the U.S., that is, wages adjusted for inflation, remained virtually unchanged in August 2013 relative to the previous month, increasing from $10.29 to $10.30 per hour. To put this in context, real hourly wages in the United States averaged $10.22 from 2006 until 2013, with a record low of $9.88 in July 2008 and a high of $10.41 in April 2009.
In sum, the U.S. economy again experienced modest job gains in August 2013. Monthly hiring has increased at a rate of about 184,000 workers over the past year, which is less than adequate for the 11.3 million Americans who are unemployed. Hourly wages appear to have stabilized and are now slightly above average levels seen from 2006 until 2013.
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