Keep the Economy Humming
The nation’s economy is setting some records this year. According to the federal Bureau of Labor Statistics, the national unemployment rate, at 3.9 percent for April, is the lowest in 17 years. Wages are rising, and likely to rise more given a tight labor market.
Now the job of the economy’s minders in Congress and the Federal Reserve is to keep it humming.
The latest Labor Department figures contain some very encouraging news. For example, while black unemployment at 6.6 percent is still more than 50 percent higher than the national average, it is the lowest it has been since 1972. The four-week moving average of applicants for unemployment is the lowest it has been since 1973. Over the past two years the number of Americans of working age who have re-entered the labor force has risen by more than one million, after falling steadily — except for a slight up-tick in 2007 — for more than a decade.
And as noted above, wages are beginning to respond. According to the Labor Department, private sector workers received their largest pay increases in 11 years during the first three months of 2018.
While the economy has been recovering steadily but slowly since the Great Recession of 2007-2009, the recent upswing likely owes much to the GOP tax reform bill passed earlier this year. The Congressional Budget Office recently predicted it will encourage real economic growth of 3 percent this year and nearly as much next.
To sustain such growth beyond then, CBO said, the nation’s work force will have to grow more rapidly than predicted.
The effects of a tight labor market are already causing some interesting developments. The Wall Street Journal recently reported that some cities and towns are trying to lure workers by offering student-debt relief, home-purchase assistance and cash bonuses.
As the recent growth in labor force participation by Americans in the prime working ages of 25 to 54 shows, a strong job market and rising wages may lure more people off the economic sidelines. Still, there is a long way to go. Another 3 million prime age workers still are sitting on the sidelines compared to the percentage at the turn of the century.
And the number of Americans who might come back to work is even larger, under the right circumstances. In 2000, 67 percent of Americans had or wanted jobs. Today the figure is below 63 percent, in part because people are entering the job market later in life as they stay in school longer, in part because more Americans prefer to raise children or have other non-remunerative pursuits, and in part because of a rigid retirement age. The difference amounts to 11 million workers. That is potentially a very big untapped economic resource.
Sen. Tim Scott, R S.C., has put a strong emphasis on expanding the labor force by creating new opportunities at the local level in South Carolina and nationwide. He is on the right track. Figuring out how to tap this latent resource is the next big economic challenge.
The economy is on the right track. Now we need to keep it moving.