Donald Trump was elected President because of strong blue-collar support. Many blue collar workers feel left out of the American dream because of stagnant incomes and/or job loss.
At the same time there is a huge national focus on the high cost of college and the associated huge student loan debt. But student loan debt is a fixable problem and is not what is holding our economy back.
Take a look at the two charts below from recent issues of the Wall Street Journal, here and here.
The first chart shows the last four growth cycles and how wages eventually tick up as unemployment continues to fall. Missing this time is hardly any growth in wages towards the end of the cycle (Of course, the current cycle won’t be over until we have the next recession).
The second chart shows that there are now more job openings (6 million) than job hires for the first time since 2001. Furthermore there were only a low of 138,000 jobs added in May with an average of 121,000 per month for the past three months. This suggests that employers are having a hard time finding qualified workers.
Obviously, what is badly needed is a renewed emphasis on workforce training. Interestingly enough, the Business Roundtable has just issued an extensive report detailing what many major corporations are doing to close America’s skills gap.
Conclusion. Lots of people, certainly including President Trump and the Republican Congress, would like to see faster economic growth. Clearly there are practical and useful ways to achieve this and many people are already trying to make it happen.
The Bureau of Labor Statistics has just reported very good news in its monthly Job Openings and Labor Turnover Survey. For the first time since 2000, the number of job openings now exceeds the number of new hires, as shown in the chart just below. This means that wages will start to grow faster as employers have to compete harder for new workers. This is an early indication that our economy will likely soon resume a faster rate of growth than its average of 2.3% since the end of the Great Recession in June of 2009. There will be many benefits. The unemployment rate should continue to keep heading downward from its current level of 5.5%. More unemployed and underemployed workers will be able to find satisfactory jobs. The labor participation rate should start to head back up from its historically low current state.
The Federal Reserve is likely to begin raising short term interest rates sooner rather than later in order to keep inflation in check before it has a chance to heat up. In other words we may be breaking out of the ambiguous state of slow-growth secular stagnation in which we have been trapped for six years.
All of this is very good news as long as Congress realizes that it is now even more urgent than ever to put our massive public debt of $13 trillion on a downward path, compared to the total economy, before interest rates begin to rise substantially and eat us alive with interest payments on this huge debt.
In this regard the Budget Plan approved by Congress just this Spring, which will lead to a balanced budget over ten years, looks very attractive indeed. It will be a mammoth job to achieve such a milestone in fiscal restraint, but doing so will lead to a more secure and prosperous future for all Americans.