Analysis of the Current State of the Labor Market in the United States

The title of the selected article is “Jobless Rate Looks Like Old Times, but the Economy Doesn’t.” The article was written by Natalie Kitroeff and was published in the online version of the New York Times on 4th May, 2018.

Where did you find the Article?

The article appeared in the New York Times online publication and can be found by following this link: https://www.nytimes.com/2018/05/04/business/economy/unemployment-jobs.html

Brief Summary of the Article

In the article, the author analyzes the rate of unemployment vis-à-vis the corresponding state of the economy. In other words, the author states that the economy has been seeing a relentless decline in the level of unemployment, which has reached 3.9 percent. The only other time that the United States’ level of unemployment had fallen below the 4 percent mark was in the year 2000, which makes it a remarkable feat. Similarly, the wage per hour figure has risen by 2.6 percent from 2017. However, the downside to this phenomenon is that the number of jobs has only increased (by 60 percent) in the low-wage, service-sector occupations. This poses extreme difficulty for policymakers who have to increase the wage bills for workers, but is good news for households who have seen their disposable income rise exponentially.

Similarly, manufacturers could be forced to tighten the job market by reducing their hiring spree because of uncertainty over cost of raw materials. Simply put, the levels of unemployment are rising correspondingly with the levels of wages, but this could be unsustainable for manufacturers and the labor market in the long run. In essence, what the author means is that, despite the jobless rate appearing to be like in the old times (it was only in the late 1960s, the rate stayed below four percent for the longest time), the economy does not appear to have had the same effect because of the possibility of the labor market to tighten. Whereas the low level of unemployment might be positive, economists posit that it is uncertain for how long the rates will be sustained without causing a disequilibrium in the market (that is, where wage levels and number of labourers exceed the demand)

Do you agree with the author’s point of view? Give your opinion.

While the author is excited about the decline in unemployment levels in the U.S. to unprecedented low levels, he is also skeptical of whether the labor market will support the high wages that the jobs have accrued. It is prudent to concur with this perspective because the supply for labor must always be in equilibrium with the demand for labor if the market is to operate optimally. For example, it would be unviable to hire more workers (even if it is in the low-paying sectors) and pay them higher wages while the cost of operations keeps on soaring or is uncertain. This is because there will be a surplus of labor.

From my opinion, the economy’s labor market will soon reach a point that is near full employment. Once the economy reaches this point, there will be a need to increase output in order to cover the increasing demand for goods. However, in the event that the economy is near full employment, it will be impossible to hire additional labor because of the uncertain operational and raw material costs. Ultimately, the U.S. economy will be unable to support the high wages demanded by the workers and correspondingly, the level of unemployment will rise again. Hence, I am in concurrence with the author’s point of view.