Looking ahead to this week's meeting of the Federal Reserve Board governors, speculation has moved past current inflation (with last week's release of the Philly Fed data, showing the "core" consumer price index for May down in the 1% range) to where inflation is going to be a year from now.

With unemployment figures low, the theory goes, continued growth in the economy will lead to wage inflation -- if there aren't additional workers, new jobs will have to pay more, which leads current jobs to pay more in order to retain current employees.) Positive wage inflation leads to higher short and long-term interest rates.

But some teenagers -- mysterious to their parents in many aspects of their behavior -- are not even looking for jobs. The impact of that "slacker" behavior is to introduce slack into our seemingly tight job market: There are millions of potential employees available to our economy who are not even on our radar screen.

According to the Wall Street Journal, only 41% of Americans between the ages of 16 and 19 were looking for work, at last count. That's down from 55% two decades ago, representing 2,380,000 potential employees who don't appear on unemployment rolls (and therefore aren't "measurable" statistically when economists calculate unemployment figures and related inflation predictions.)

Abraham Mosisa, an economist for the Bureau of Labor Statistics, points out that teenagers not looking for jobs may be responding to the competitive environment for low-end jobs: They're competing with illegal immigrants and other low-skilled workers, including single moms who have been nudged off the welfare rolls in the past ten years.

This means that we're better positioned than the data shows to keep our unemployment figures at their healthy current rate as our economy continues to grow.

-- Jordan Graham, Mortgage Broker

 

2 Comments on Slackers: Putting the slack in our "tight" job market

JUN
25
2007
2 Featured Posts
Jordan,
   I'm anticipating a strong economy, at least over the next couple of years, (barring unforseen social or political unrest) and expecting rates to stay at least as high as they are right now.  I've got a lot of friends that are banking on a significant recession in the near future and a drop in rates.  Though this doesn't affect me, directly, today, it does affect whether or not I put my clients into 30yr fixed programs or suggest a 3/1 ARM.  I've been going with the fixed rate suggestion as of late.  Do you have any input or opinion on the topic?  I'd be interested to hear.
8:56am • #1

Hi Abe!

Thanks for the thoughtful comment!  I also anticipate a strong economy in the next couple of years, and the recent rise in yields on the 10-year is bringing back the whole "how long do you know you'll be in this mortgage?" question -- the essential driver behind adjustable rate mortgages. 

One guideline I like to use with buyers is to qualify them on the basis of a 30 year fixed rate mortgage.  If they can't afford the home they're considering with a fixed rate loan, I share my view with them that they may be reaching too high, and point to the mounting tragedy of foreclosures around the country.

If they can afford it with a 30 year fixed rate loan, then the question of how long they know they'll be there becomes relevant to me. 
9:05am • #2


What does the graphic say?
Leave a response…

(optional)
Spam Prevention:
 
Jordan_p_sm

Jordan Graham

Greenwood Village, CO

More about me…

Office Phone: (720) 297-8002

Cell Phone: (720) 297-8002

Email Me



Links

Archives

RSS 2.0 Feed for this blog