Global Chartbook: June 2018


Unemployment in the United States discusses the causes and measures of U.S. unemployment and strategies for reducing it. Job creation and unemployment are affected by factors such as economic conditions, global competition, education, automation, and demographics.

For the second quarter in a row, nearly half of the growth in the first quarter came from the quickening pace of consumer spending. Retrieved 1 December

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The Wells Fargo Economics Group provides commentary and analysis on international, national, and regional economic trends to help serve our clients’ business and financial needs. Our experienced economists have been featured in many national publications, academic and economic journals, and on.

Turbulence in Argentina and Turkey has drawn attention to emerging markets, and trade war concerns have been reignited as the United States draws closer to implementing tariffs on both specific goods steel and aluminum and specific countries China. Despite the rapidly changing headlines, the underlying trend in the global economy largely remains intact. A Q1 slowdown in numerous developed economies appears to be giving way to stronger Q2 growth, led by the United States.

In the developing world, conditions have been more mixed. Other emerging markets economies, however, have weathered the storm: Russian markets have remained relatively calm, Chinese economic growth continues to plug along, and the Indian economy has rebounded from a structural reform-driven slowdown. Against this backdrop, our forecast for global GDP growth has ticked 0. Download Full Economic Indicator.

Recently, the stock market has experienced high levels of volatility. If you are thinking about participating in fast moving markets, please take the time to read the information below. Wells Fargo Investments, LLC will not be restricting trading on fast moving securities, but you should understand that there can be significant additional risks to trading in a fast market.

We've tried to outline the issues so you can better understand the potential risks. If you're unsure about the risks of a fast market and how they may affect a particular trade you've considering, you may want to place your trade through a phone agent at TRADERS. The agent can explain the difference between market and limit orders and answer any questions you may have about trading in volatile markets.

Higher Margin Maintenance Requirements on Volatile Issues The wide swings in intra-day trading have also necessitated higher margin maintenance requirements for certain stocks, specifically Internet, e-commerce and high-tech issues.

Stocks are added to this list daily based on market conditions. A change in the margin requirement for a current holding may result in a margin maintenance call on your account. Fast Markets A fast market is characterized by heavy trading and highly volatile prices. These markets are often the result of an imbalance of trade orders, for example: Remember, fast market conditions can affect your trades regardless of whether they are placed with an agent, over the internet or on a touch tone telephone system.

In Fast Markets service response and account access times may vary due to market conditions, systems performance, and other factors. Potential Risks in a Fast Market "Real-time" Price Quotes May Not be Accurate Prices and trades move so quickly in a fast market that there can be significant price differences between the quotes you receive one moment and the next. Even "real-time quotes" can be far behind what is currently happening in the market.

The size of a quote, meaning the number of shares available at a particular price, may change just as quickly. A real-time quote for a fast moving stock may be more indicative of what has already occurred in the market rather than the price you will receive. Your Execution Price and Orders Ahead In a fast market, orders are submitted to market makers and specialists at such a rapid pace, that a backlog builds up which can create significant delays.

Market makers may execute orders manually or reduce size guarantees during periods of volatility. When you place a market order, your order is executed on a first-come first-serve basis. This means if there are orders ahead of yours, those orders will be executed first. The execution of orders ahead of yours can significantly affect your execution price. Your submitted market order cannot be changed or cancelled once the stock begins trading. Initial Public Offerings may be Volatile IPOs for some internet, e-commerce and high tech issues may be particularly volatile as they begin to trade in the secondary market.

Customers should be aware that market orders for these new public companies are executed at the current market price, not the initial offering price. Market orders are executed fully and promptly, without regard to price and in a fast market this may result in an execution significantly different from the current price quoted for that security. Using a limit order can limit your risk of receiving an unexpected execution price.

Large Orders in Fast Markets Large orders are often filled in smaller blocks. An order for 10, shares will sometimes be executed in two blocks of 5, shares each.

In a fast market, when you place an order for 10, shares and the real-time market quote indicates there are 15, shares at 5, you would expect your order to execute at 5.

In a fast market, with a backlog of orders, a real-time quote may not reflect the state of the market at the time your order is received by the market maker or specialist. Once the order is received, it is executed at the best prices available, depending on how many shares are offered at each price. Volatile markets may cause the market maker to reduce the size of guarantees.

This could result in your large order being filled in unexpected smaller blocks and at significantly different prices. In this example, the market moved significantly from the time the "real-time" market quote was received and when the order was submitted. Online Trading and Duplicate Orders Because fast markets can cause significant delays in the execution of a trade, you may be tempted to cancel and resubmit your order.

Please consider these delays before canceling or changing your market order, and then resubmitting it. There is a chance that your order may have already been executed, but due to delays at the exchange, not yet reported. When you cancel or change and then resubmit a market order in a fast market, you run the risk of having duplicate orders executed.

Federal Reserve tracks a variety of labor market metrics, which affect how it sets monetary policy. One "dashboard" includes nine measures, only three of which had returned to their pre-crisis levels as of June Research indicates recovery from financial crises can be protracted relative to typical recessions, with lengthy periods of high unemployment and substandard economic growth. Employment trends can be analyzed by any number of demographic factors individually or in combination, such as age, gender, educational attainment, and race.

For example, the prime working age 25—54 white population declined by 4. This is a major reason why non-white and foreign-born workers are increasing their share of the employed.

However, white prime-age workers have also had larger declines in labor force participation than some non-white groups, for reasons not entirely clear. Such changes may have important political implications. BLS statistics indicate foreign-born workers have filled jobs dis-proportionally to their share in the population. There are a variety of domestic, foreign, market and government factors that impact unemployment in the United States. These may be characterized as cyclical related to the business cycle or structural related to underlying economic characteristics and include, among others:.

Employment is both cause and response to the economic growth rate , which can be affected by both government fiscal policy spending and tax decisions and monetary policy Federal Reserve action. The deficit expanded primarily due to a severe financial crisis and recession. Keynesian economics argues that when the economic growth is slow, larger budget deficits are stimulative to the economy. This is one reason why the significant deficit reduction represented by the fiscal cliff was expected to result in a recession.

However, the deficit from to was in line with historical average, meaning it was not particularly stimulative. For example, CBO reported in October Relative to the size of the economy, that deficit—at an estimated 2. By CBO's estimate, revenues were about 9 percent higher and outlays were about 1 percent higher in than they were in the previous fiscal year.

Monthly job losses began slowing shortly thereafter. By March , employment again began to rise. From March to September , over 4.

As of December , employment of Debates regarding monetary policy during — centered on the timing and extent of interest rate increases, as a near-zero interest rate target had remained in place since the — recession. Ultimately, the Fed decided to raise interest rates marginally in December Federal Reserve has taken significant action to stimulate the economy after the — recession.

The Fed expanded its balance sheet significantly from to , meaning it essentially "printed money" to purchase large quantities of mortgage-backed securities and U. This bids up bond prices, helping keep interest rates low, to encourage companies to borrow and invest and people to buy homes.

It planned to end its quantitative easing in October but was undecided on when it might raise interest rates from near record lows. The Fed also tied its actions to its outlook for unemployment and inflation for the first time in December Liberals typically argue for government action or partnership with the private sector to improve job creation.

Typical proposals involve stimulus spending on infrastructure construction, clean energy investment, unemployment compensation, educational loan assistance, and retraining programs. Liberals historically supported labor unions and protectionist trade policies. Liberals tend to be less concerned with budget deficits and debt and have a higher tolerance for inflation or currency devaluation to improve trade competitiveness, as a weaker currency makes exports relatively less expensive. During recessions, liberals generally advocate solutions based on Keynesian economics , which argues for additional government spending when the private sector is unable or unwilling to support sufficient levels of economic growth.

Conservatives typically argue for free market solutions, with less government restriction of the private sector. Conservatives tend to oppose stimulus spending or bailouts, letting the free market determine success and failure.

Typical proposals involve deregulation and income tax rate reduction. Conservatives historically have opposed labor unions and encouraged free trade agreements. Fiscal conservatives express concern that higher budget deficits and debt damage confidence , reducing investment and spending. Conservatives argue for policies that reduce or lower inflation. Conservatives generally advocate supply-side economics.

The affluent are much less inclined than other groups of Americans to support an active role for government in addressing high unemployment. A March Gallup poll reported: Americans also suggest creating jobs by increasing infrastructure work, lowering taxes, helping small businesses, and reducing government regulation. Republicans next highest ranked items were lowering taxes and reducing regulation, while Democrats preferred infrastructure stimulus and more help for small businesses.

The Pew Center reported poll results in August Democrats generally advocated the liberal position and Republicans advocated the conservative position. Republican pressure reduced the overall size of the stimulus while increasing the ratio of tax cuts in the law. The initial attempt to pass the bill failed in the House of Representatives due primarily to Republican opposition.

However, the bill was stalled in the Senate primarily due to Republican opposition. The Congressional Research Service summarized the bill as follows: President Barack Obama proposed the American Jobs Act in September , which included a variety of tax cuts and spending programs to stimulate job creation.

President Obama stated in October They'll get a vote on whether they believe we should protect tax breaks for small business owners and middle-class Americans, or whether we should protect tax breaks for millionaires and billionaires.

Critics argued that with an employment crisis, such fiscal austerity was premature and misguided. It is unclear whether lowering marginal income tax rates boosts job growth, or whether increasing tax rates slows job creation. This is due to many other variables that impact job creation. Economic theory suggests that other things equal tax cuts are a form of stimulus they increase the budget deficit [] and therefore create jobs, much like spending.

However, tax cuts as a rule have less impact per additional deficit dollar than spending, as a portion of tax cuts can be saved rather than spent. One study indicated that tax cuts do create employment growth, particularly tax cuts for the lower earners. But during the Bush years, when the rates were lower, employment rose by just 1. Conservatives typically argue for lower U. Liberals have proposed legislation to tax corporations that offshore jobs and to limit corporate tax expenditures.

This was below the 2. A variety of options for creating jobs exist, but these are strongly debated and often have tradeoffs in terms of additional government debt, adverse environmental impact, and impact on corporate profitability. These are hotly debated by experts from across the political spectrum.

Many experts advocate infrastructure investment, such as building roads and bridges and upgrading the electricity grid. Such investments have historically created or sustained millions of jobs, with the offset to higher state and federal budget deficits. In the wake of the — recession, there were over 2 million fewer employed housing construction workers. President Obama proposed the American Jobs Act in , which included infrastructure investment and tax breaks offset by tax increases on high income earners.

Lowering the costs of workers also encourages employers to hire more. This can be done via reducing existing Social Security or Medicare payroll taxes or by specific tax incentives for hiring additional workers. CBO estimated in that reducing employers' payroll taxes especially if limited to firms that increase their payroll , increasing aid to the unemployed, and providing additional refundable tax credits to lower-income households, would generate more jobs per dollar of investment than infrastructure.

Reducing the rate and eliminating loopholes may make U. Businesses are faced with paying the significant and rising healthcare costs of their employees. Many other countries do not burden businesses, but instead tax workers who pay the government for their healthcare. This significantly reduces the cost of hiring and maintaining the work force. Various studies place the cost of environmental regulations in the thousands of dollars per employee.

Americans are split on whether protecting the environment or economic growth is a higher priority. Regulations that would add costs to petroleum and coal may slow the economy, although they would provide incentives for clean energy investment by addressing regulatory uncertainty regarding the price of carbon.

President Obama advocated a series of clean energy policies during June Reducing carbon pollution from power plants; Continue expanding usage of clean energy; raising fuel economy standards; and energy conservation through more energy-efficient homes and businesses.

Raising the minimum wage would provide households with more money to spend, in an era with record corporate profits and a reluctance of corporations to invest. Critics argue raising employment costs deters hiring. President Obama advocated raising the minimum wage during February A range of economic studies show that modestly raising the minimum wage increases earnings and reduces poverty without jeopardizing employment.

In fact, leading economists like Lawrence Katz, Richard Freeman, and Laura Tyson and businesses like Costco, Wal-Mart, and Stride Rite have supported past increases to the minimum wage, in part because increasing worker productivity and purchasing power for consumers will also help the overall economy.

The Economist wrote in December Some studies find no harm to employment from federal or state minimum wages, others see a small one, but none finds any serious damage. Ten states index their minimum wage to inflation. Regulatory costs on business start-ups and going concerns are significant. Requiring laws to have sunset provisions end-dates would help ensure only worthwhile regulations are renewed. New businesses account for about one-fifth of new jobs added.

Education policy reform could make higher education more affordable and more attuned to job needs. Unemployment is considerably lower for those with a college education. However, college is increasingly unaffordable.

Providing loans contingent on degrees focused on fields with worker shortages such as healthcare and accounting would address structural workforce imbalances i. One of the most consequential examples is early childhood education. Research shows that children from lower-income households who get good-quality pre-Kindergarten education are more likely to graduate from high school and attend college as well as hold a job and have higher earnings, and they are less likely to be incarcerated or receive public assistance.

Income inequality, expressed by wage stagnation for middle- and lower-income families coupled with a shift in income growth to the top earners, can adversely affect economic growth, as wealthier families tend to save more. The quality or pay of the job matters, not just creating more jobs. The union movement has declined considerably, one factor contributing to more income inequality and off-shoring. Reinvigorating the labor movement could help create more higher-paying jobs, shifting some of the economic pie back to workers from owners.

However, by raising employment costs, employers may choose to hire fewer workers. Creating a level playing field with trading partners could help create more jobs in the U. Wage and living standard differentials and currency manipulation can make "free trade" something other than "fair trade. CBO reported several options for addressing long-term unemployment during February Two short-term options included policies to: Over the long-run, structural reforms such as programs to facilitate re-training workers or education assistance would be helpful.

The Council released an interim report with a series of recommendations in October The report included five major initiatives to increase employment while improving competitiveness:.

Analyzing the true state of the U. Further, the reasons for persons leaving the labor force may not be clear, such as aging more people retiring or because they are discouraged and have stopped looking for work. A rough comparison of September when the unemployment rate was 5. The civilian population increased by roughly 10 million during that time, with the labor force increasing by about 2 million and those not in the labor force increasing by about 8 million.

However, the 2 million increase in the labor force represents the net of an 8 million increase in those employed, partially offset by a 6 million decline in those unemployed. So is the primary cause of improvement in the unemployment rate due to: Did the 6 million fewer unemployed obtain jobs or leave the workforce? CBO issued a report in February analyzing the causes for the slow labor market recovery following the — recession.

CBO listed several major causes:. One method of analyzing the impact of recessions on employment is to measure the period of time it takes to return to the pre-recession employment peak. By this measure, the — recession was considerably worse than the five other U.

By May , U. For example, it took Norway 8. The ratio of full-time workers was There is a long-term trend of gradual reduction in the share of full-time workers since , with recessions resulting in a decline in the full-time share of the workforce faster than the overall trend, with partial reversal during recovery periods.

For example, as a result of the — recession, the ratio of full-time employed to total employed fell from Stated another way, the share of part-time employed to total employed rose from There is a trend towards more workers in alternative part-time or contract work arrangements rather than full-time; the percentage of workers in such arrangements rose from This implies all of the net employment growth in the U. Estimates vary for the number of jobs that must be created to absorb the inflow of persons into the labor force, to maintain a given rate of unemployment.

This number is significantly affected by demographics and population growth. For example, economist Laura D'Andrea Tyson estimated this figure at , jobs per month during Economist Paul Krugman estimated it around 90, during , mentioning also it used to be higher. This approximates the Krugman figure. Wells Fargo economists estimated the figure around , in January If the participation rate holds steady, how many new jobs are needed to lower the unemployment rate?

The steady employment gains in recent months suggest a rough answer. The unemployment rate has been 7. Meanwhile, job gains have averaged , Therefore, it appears that the magic number is something above , jobs per month to lower the unemployment rate.

Federal Reserve analysts estimated this figure around 80, in June