Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

What Factors Are Weakening US Labor Markets?

Published 08/03/2014, 01:09 AM
Updated 07/09/2023, 06:31 AM

This is just meant to be a few thoughts. I haven’t worked everything out, but I want to talk about how the labor markets are weak.

Yes, the headline statistics are strong. The U-3 unemployment figure is low at 6.2%. But look at a few other statistics:

Compensation of Employees

My, but wages as a share of GDP has been falling.

Compensation Of Employees

And real wages have flatlined. No surprise that many feel pinched in the present environment. Even the Federal Reserve Chairwoman Janet Yellen expresses her doubts about the labor markets, which was expressed through the most recent FOMC Statement.

The problem is this: the relationship between labor employment and monetary policy is weak. It is weaker than pushing on a string. There are two major factors retarding the US labor market, and they are globalization and increased productivity from technology.

The value of knowledge is rising relative to less-skilled labor. As such, we are seeing increased income inequality in the US, but lower income inequality globally. Bright people in foreign lands who can transmit their skills over the internet can do better for themselves, even as more expensive counterparts in the US lose business.

Call this the revenge of the nerds. The internet enables bright people to profit from their differential knowledge, as it can be applied to wider opportunities.

Think of India for a moment. Many bright people with advanced degrees, but education amounts to little unless you can use it for your own benefit.

Here’s my main point. The FOMC con’t do much about the labor markets; their power is weak. The bigger factors of globalization and technology can’t be fought. They are too big.

Thus, you are on your own. The US Government does not have the power to re-create the unique middle class prosperity of the ’50s and ’60s. If you work for others, you are not your own master. Aim to make yourself the master of your situation, by making yourself invaluable to your clients.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.