Alan Greenspan’s Take on the Labor Market

October 19, 2018 4:26 am Published by Leave your thoughts

FED CHAIRMAN FRATERNITY

In a recent interview, Alan Greenspan, one of the most well-known Fed Chairmen in recent history, gave his vote of confidence in the current Fed Chair, Jerome Powell. He described the present labor market as unprecedented because unemployment is at a 50 year low. Economists analyze shifts in macroeconomies as fractions of percentage points. It is a new record and records should be noted, but that doesn’t mean all our problems go away. Low jobless rates are fantastic, but are we experiencing the healthiest of job markets? I would say not.

OUR GDP

Greenspan himself said that our GDP, the productivity per person, as a country is problematic because it is slow. At a high level, this means more workers generating less dollar value for every hour worked. He believes that the demand for employees will naturally force wages up. I hope he is right because our low unemployment is coupled with historically low wage growth. It seems as if the Chairman anticipates inflation will catch up to his interest rate policy. CNBC Yes, the Federal Reserve continues to raise interest rates periodically to control inflation pressure, and apparently, intends to continue to do so.

CONSUMER MARKETS

Consumer spending continues to be strong, a good sign going into the holiday season. But, is it sustainable? I think we will have a much better indication of how our retail markets are performing once the results from the holiday shopping rush come in. More people shop online, and that trend has led to the rapid decline of major retailers. Sears filed for Chapter 11 bankruptcy protection this week. “The more than 125-year-old company, once the most iconic retailer in America, has seen its sales cut in half since 2014.” BusinessInsider Sears has sadly been on this seemingly irreversible trajectory for years. I don’t think that the failure of this retailer is an indicator of the broader retail market. If only I had binoculars to see 3 months into the future.

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This post was written by Daniel Jones

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