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Wednesday October 23rd 2019

Mixed News: U.S. Economy Still Up and Down

In the aftermath of the subprime mortgage crisis, the economy quickly fell into recession as credit markets tightened up considerably due to fears of continued losses. Despite the efforts of government policy makers to revive the gasping economy, things remain in a precarious state. The Treasury Department arranged for a bailout for many of the largest investment banks, most of whom were holding on to billions of worthless assets. Congress agreed to a $800 billion stimulus package in an attempt to boost overall demand throughout the economy. In addition, the Federal Reserve is already engaging in its second round of quantitative easing, buying up large amounts of Treasury bonds to keep short-term interest rates near zero percent. It’s begging to feel a bit like an amusement park ride.

Officially, the American economy has snapped out of the recession. GDP growth in the first quarter was 1.8 percent, a not very strong number but an increasing one nonetheless. Overall, the recovery has been very anemic. Indeed, there are real fears that the economy could slip into a double-dip recession unless appropriate measures are taken. Of course, there have been a few positive signs in the economy over the past year. The stock market did very well in 2010; the S&P 500 returned 15 percent last year. Many businesses appear to be recovering from the 2008 recession, although they seem reluctant to reinvest those profits given the precarious state of the economy. Unemployment has been trending downward over the past few months, but few economists would call such job growth numbers encouraging.

Unfortunately, there seems to be as many negative numbers as positive ones. Hourly wage growth grew at only two percent last year. And this has been part of a much longer trend of stagnant wage growth over the past thirty years, especially for those in the lower-half of the income distribution. It is true that this is at least partially due to increases in health care expenditures made by employers on behalf of employees, but there has been a disconnect between productivity and wages. As long as unemployment remains so high, there will be little upward pressure on wages.

The even more discouraging fact is that unemployment is probably even higher than the official rate reported by the government. Once you account for workers who are underemployed, such as full-time workers only working part-time or workers in jobs well below their skill set, and workers who have dropped out of the job market completely, the unemployment rate is closer to 15 percent.

As wages have stagnated or fallen, many workers are seeing their standard of living fall thanks to rising prices in many consumer staples like gasoline and food. Indeed, gasoline is quickly reaching an average of $4 a gallon, further reducing available disposable income. Overall, food prices are expected to rise four percent this year, although many important foodstuffs will increase in price even more than that.

On top of all of this, the government is currently operating under a $1.6 trillion budget deficit. As the debate in Washington turns from economic stimulus to debt reduction, the government may inadvertently squash a nascent recovery by reducing aggregate demand through broad-based spending cuts. Indeed, some economists have argued that even more spending may be necessary to boost the economy suffering under a large amount of excess capacity.

Unfortunately, the American economy is suffering from a variety of woes and it appears that the government has already exhausted most of its standard policy prescriptions. Interest rates are as low as they are going to get and government spending is not likely to get any higher. In the end, we can likely expect a very slow recovery into the foreseeable future.

Increased Sales May Not Keep Pace with Rising Commodity Costs

The final three months of 2010 were incredibly encouraging for Corporate America. The S&P 500 companies reported sales figures that largely outpaced expectations. Profits rose an average of 37% over the final quarter of the year, with sales figures that showed at least a 6% increase. The implications of this increase in profit and sales numbers continue to drive consumer confidence and seem to imply that the economy is still healing from the recent recession.

Sales Indicate Real Demand

One of the most positive aspects of the increased sales figures is that they seem to show profits based on actual demand rather than profits that resulted from companies cutting back. That means that the improvements are actually signs of economic health rather than conservative measures intended to cut costs out of the budgets of corporations. The progress of the last quarter represents actual increased sales, which have been slow to pick up in recent years. Economic recovery is not entirely complete, but the last quarter sales figures are a sign that it is still moving in the right direction.

Increased Foreign Competition is a Concern

Some companies are concerned that commodity costs will rise due to an increase in global competition. Corporations are finding a weaker domestic market for their goods as the demand for foreign goods is rising. This could cause the corporations to find new ways to increase demand in the face of competition from markets that can afford to lower their prices. Conversations about increased spending and weaker international demand have already caused dips in the stock market as investors become concerned that the 2010 sales increases are not sustainable numbers. If commodity prices rise as expected, the combination of high competition and more expensive manufacturing processes could be damaging to the economic turnaround.

Businesses Could be Forced to Pass Along Higher Costs

As companies face higher costs in 2011, economic researchers are concerned that those increased costs will need to be passed on to consumers in the form of rising prices. If prices can remain stable over the next year, consumer confidence would continue to rise. If prices begin to rise later in the year, however, they could have a negative impact on the country’s ability to climb out of the recent financial struggles. Rising prices on consumer goods due to the rising cost of manufacturing resources without a substantial decrease in the unemployment rate could set the economy back by at least a year.

Basic Materials More Expensive

Although the sales increases are a positive sign, many companies remain guarded in their optimism. Many of the biggest United States manufacturers are worried about increases in their manufacturing costs over the next year. Companies are already setting aside billions of dollars that they expect to need to use for increased commodity costs in the near future. Some companies expect to increase spending in their research and development areas as well. Many analysts worry that these cost increases will not be covered by the modest gains in sales and profit figures from the end of 2010.

Top Jobs: Demand Rising in These Vocations

While jobs are looking scarce right now, certain sectors of the economy are expected to grow in the next few years. Add to that the dwindling population and you will be looking at a shortage of workers in the coming decade. It may be hard to believe that the jobs, so hard to find today, will be abundant so soon. But that’s just what is being forecast by Barry Bluestone and Mark Melnik, authors of a research report conducted for the Boston Redevelopment Authority titled, “After the Recovery: Help Needed.”

This report was co-funded by Civic Ventures, an organization focusing on issues that affect baby boomers, work, and social purpose. The report predicts an astounding 5 million job vacancies in the U.S. in the next eight years. Where will these jobs be? Most of them will be in sectors like healthcare, education, government, NGOs and the service industry. Here is a list of job titles that will be in great demand:

Business Operations Specialist

This job title may describe several roles, but mainly refers to a middle management position as a technology analyst in the telecommunications field. The specialist will analyze data and then find ways to make operations more efficient through technology. He or she may also oversee implementation of recommendations, requiring interpersonal and project management skills. Salary: About $45,000

Child-care Workers

Caregivers are needed at both public and private daycare settings. Workers must see to the safety and well-being of children, both emotional and physical. Most will care for children between the ages of 6 weeks to 6 years. Salary: About $24,000


Pastors and ministered are needed to see to the spiritual and emotional needs of individuals and families. They may conduct worship services, offer spiritual and moral guidance and counseling for clergy members. Salary: About $50,000

General and Operations Managers

The managers are responsible for overseeing the day-to-day aspects of a business. They must manage employees to ensure the business meets objectives determined by upper management. Hours are often long, but the pay is good. Salary: About $95,000

Home Health Aides, Personal and Home Care Aides

These workers often assist elderly, handicapped and otherwise disabled individuals live independently by visiting in the home, helping with jobs the client cannot manage. Home health aides ensure maximum independence for the patient by performing the specific tasks the disabled individual cannot accomplish. These may include personal care, meal preparation and light errands. Salary: About $27,000

Licensed Practical and Vocational Nurses

These caregivers treat ill, injured, or disabled individuals in many health care settings and institutions. A license is required to do the job and these nurses often work under the supervision of a Registered Nurse. Salary: $40,000 to $45,000

Nursing Aides, Orderlies and Attendants

These hospital workers will be in the greatest demand. They offer basic patient care as directed by nursing staff. They may feed, groom or move patients and change linens. Salary: $25,000 to $34,000

Medical Assistants

Often performing secretarial duties, medical assistants keep the doctor’s office running by scheduling appointments, managing medical records and other administrative tasks. Salary: About $36,000

Medical and Health Service Managers

These managers coordinate and oversee a healthcare business. They may be specialists in a particular department, or in charge of entire facilities. A bachelor’s degree is acceptable at entry level, but a master’s degree is commonly required. According to the Bureau of Labor Statistics, workers make between $71,000 to $87,000.

Registered Nurses

Nurses will continue to be in high demand in the coming years. Nurses assist in patient care while educating patients and families about medical conditions and offering emotional support. Salary: About $61,000

Teachers, teacher’s assistants, and receptionists will also be in high demand. Those out of work today may wish to concentrate on the training needed to fulfill the job needs in one of these fields.