So just what is going on in the US economy? There seems to be confusion over recent employment figures and what that means for future growth.
Some analysts argue that the glass is half empty. They cite the slow down in new job growth in May as a major indicator. They worry job growth has lost its momentum, as signal that the economy will soon take a turn for the worse.
Others argue the glass is half full. They point out that we have had 33 months of job growth with 5.3 million new jobs (1.9 million in last 12 months alone).
The National Federation of Independent Business Chief Economist William Dunkelberg has now added his voice to this debate. It seems that when we look at small business, at least, the picture is a little more complex.
"The most recent jobs report ignited talk about slowing and weak labor demand. However, the unemployment rate fell, which is not a sign of a soft labor market unless workers are leaving the workforce in spite of rising compensation (nominal, real compensation has been eroded by rising energy costs). And the percent of the adult population with a job has been rising, reaching levels exceeded only by the crazy dot.com years. Neither signals weakening labor demand."So far this year, the small-business half of the economy (employing 60 percent of the private workforce) is telling a different story. The net percent of owners planning to increase employment has been historically high for a year now (exceeded only by dot.com numbers), driven by business expansion supported by strong growth.
"We've seen weak labor markets in the 32-year history of the NFIB small-business economic reports, and this doesn't look like one. The declining unemployment rate and the rising employment-to-population ratio are more consistent with the notion that there is a supply problem in our labor markets, not deficient demand," Dunkelberg concluded.
What is his evidence of this?
NFIB has found that small business is planning to create jobs.
They have also found that there are job openings in small businesses today.
So what is the problem? Labor quality.
So what does mean? Small businesses are the engine of this economic expansion and will be for years to come. Job shortages can lead to two outcomes over the intermediate and long run. One outcome could be that labor shortages may lead to wage induced inflation. Another outcome is that labor shortages begin to strangle small businesses' ability to continue the expansion. These are not mutually exclusive outcomes.
We are poised at the edge of a possible economic expansion the likes of which we have not seen in over a century. To make sure that we don't blow it, we need to totally rethink our economic policy including much freer markets with decreased regulation, and a simple and neutral tax system.
But, we also need to make sure to get the immigration crisis solved properly. Politicizing immigration policy misses the point. The choices should not be between wide open borders or isolationism, as we now hear the debate framed in Washington.
We need highly controlled immigration, strong protection of the borders, but both of these need to be coupled with an aggressive plan to meet our growing shortage of qualified workers. Cut the needless red tape for qualified immigrants coming here for the right reasons, but make sure that we do not import other countries social welfare problems.
