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Key Concepts in Economics

0 May 28 2016, 14:08 in Argumentative Essay

ANALYSIS

One of the key points of the article by Long (2016) is that U.S. companies have been reducing their job hiring recently, amidst weak economic growth. This has resulted to a slowdown in the number of additional jobs created in April 2016 – only 160,000 jobs were added during last month, much lower than market expectations. This was in sharp contrast with the strong hiring in the past two years. Because of this, the country’s unemployment rate remains at 5% in April 2016 (Long, 2016).

Another key point raised in the article is the weakness of the U.S. economy. Accordingly, the world’s largest economy has not been growing as experts anticipated, resulting to a sluggish job growth in the previous month. In fact, based on official government figures, the economy barely expanded in the first quarter of 2016 (Schwartz, 2016). Despite the noticeable economic slowdown and moderate growth, President Barrack Obama tries to take a victory lap for the economic recovery from the global economic and financial crisis of 2008 (Long, 2016). However, Donald Trump, the Republican presidential candidate, discredited the achievement of the current administration, saying that the U.S. economy has been terrible under President Obama (Long, 2016). As such, the state of the U.S. economy and its future is the number one decided factor of the voters in the upcoming presidential election.

However, the article points that despite the economic slowdown, some economists still believe that the economy remains healthy and the labor market is still strong. More specifically, Wells Fargo chief economist Sam Bullard judges the performance of the U.S. economy favorably. Moreover, Bullard argues that the condition of U.S. labor market is better than what the official figures suggest because aside from the job increases in the retail sector, there are also remarkable increases in the number of jobs created in the business and white collar job categories (Long, 2016). This is supported by Barclays chief economist Michael Gapen who argued that the soft figures signify weakness in the labor market because most industries remain strong (Schwartz, 2016). There is also an increase in the number of Americans who are now looking for work because of the better and more job opportunities in the market.

The article also points that despite the overall better labor market condition in the United States, some sectors and industries are still struggling, especially the energy and mining sectors. In April 2016, the energy sector shed around 7,000 jobs, mainly due to continued low oil prices (Long, 2016). From September 2014 to April 2016, the energy and mining sectors shed about 191,000 jobs (Long, 2016). These struggling sectors are offsetting the increases in job creation in other sectors of the economy. The author of the article indicates that the economic recovery should be shared and felt by all sectors and workers.

Further, it is also pointed in the article that there is a high hope that wages will increase in the near future. In fact in April 2016, wages have increased by 2.5% from a year earlier, an improvement from the sluggish growth seen in the previous month (Long, 2016). Though, it remains below the 3 percent to 3.5 percent wage growth per year typical of a robust U.S. economy, some economists already consider it as healthy pace and an indication of a strong labor market. According to the country’s Labor Secretary Tom Perez, the economic recovery should be inclusive and felt by workers through higher real wages.

The main economic concept that can be applied in this article is unemployment. The country’s unemployment rate is computed by dividing the number of employed workers from the total labor force. Because of this, the decline in the additional number of jobs created directly affects the overall unemployment rate. However the decline in the number of additional jobs is not huge enough to negatively affect the nationwide jobless rate. Accordingly, the overall unemployment rate remains unchanged. However, unemployment rate is expected to increase in the energy and mining sectors because of the continued sacking of workers in the past recent months, amidst low fuel prices.

Unemployment is one of the major determinants of the health of an economy. In fact, rising or continued high unemployment indicates weak economy (Koba, 2014). In the United States, the economy is adversely affected by an increase in unemployment rate through a decline in the level of disposable income. If there is an increase in the number of unemployed Americans in the United States, there will be less people who can afford to purchase goods and services. Because of the decline in the overall spending in the economy, GDP growth will also decline. There are also other ways that unemployment can negatively impact the country’s economy. For an instance, people who have been laid off from their jobs will beto pay their monthly mortgage payments and credit card balances. These will cause an increase in foreclosures and the amount of non-performing assets for banks and other financial institutions, resulting to a contraction in economic growth.

Based on my analysis, I agree with the Long (2016) about the country’s overall unemployment level, labor market conditions, and state of the economy. I believe that despite the slowdown in the growth of additional jobs created in the market, the labor market remains healthy. In fact, there are still enough additional jobs created to absorb the increase in the number of Americans looking for job in the market – causing the nationwide unemployment rate unchanged in April 2016. Moreover, wages are increasing again and there are expectations that wages will continue to increase in the future – an indication that the labor market remains healthy.

References

Long, H. (2016, May 6). U.S. hiring slows: Only 160,000 jobs added in April. CNN Money. Retrieved from http://money.cnn.com/2016/05/06/news/economy/april-jobs-report/

Schwartz, N. (2016, May 6). U.S. added 160,000 jobs last month as brisk hiring slowed. The New York Times. Retrieved from http://www.nytimes.com/2016/05/07/business/economy/jobs-report-unemployment-wages.html?_r=0

Koba, M. (2014, April 4). How is monthly jobs report compiled? CNBC explains. CNBC. Retried from http://www.cnbc.com/id/44451664

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