A Winning Combination: Labor and the Economy


By Jonathan Scheid

In honor of Labor Day and our recent jobs report, we felt it was an appropriate time to review labor around the globe. As we discussed many times in the past, job growth and employment are vital to an economy’s expansion and a nation’s well-being. With seemingly every developed nation’s central bank trying to lower unemployment to stimulate economic growth, any jobs-related news is analyzed and dissected as soon as it is released.

Last Friday, the U.S. jobs report for showed that 151,000 new jobs were created in August and the unemployment rate remained unchanged at 4.9% (source: BLS). While the market was expecting 180,000 new jobs, an economy creating 151,000 jobs a month is fine. It surely isn’t indicative of an economy headed into a recession, but it also isn’t indicative of a fast growing economy.

The jobs market in the U.S. has come a long way since the Great Recession in 2008 and 2009. The table below shows unemployment rates before, right after and more than five years following the last global recession. For the U.S., we can see unemployment was 4.9% in 2005 before the recession, it practically doubled to 9.3% at the end of 2010 after the recession, and has come back down to 4.9% most recently. While it took longer than past recessions to get back to where we were, we at least have recovered.

Some countries, like Japan and the United Kingdom, have followed a similar path. These countries had healthy job markets before the recession, saw unemployment increase during the recession and have seen it return to reasonable levels over time. Some countries, like France, Italy and Spain, had high unemployment before the recession and have only seen it worsen during and following the recession.

While we won’t go into the specific details about the local economic and societal conditions that are impacting each country, we will point out the challenges that some of these unemployment levels present. Take Spain, currently, almost one out of every five people that want to work can’t find a job. That means there is a fairly large group in the population that is relying on government subsidies and struggling to make ends meet. Their skills are getting stale and they aren’t actively contributing to the economy. We can easily imagine how difficult it is for an economy with high unemployment can thrive. Yet, Spain’s unemployment was as high as 25% in 2014 and getting it below 20% is a sure sign of progress.

As long as workers see progress, they have hope. Many nations continue to see progress. With our nation’s celebration of working people fresh on our minds, let’s give thanks to those that have jobs and encouragement to those looking for them.

The views and opinions contained herein are those of Bellatore Financial, Inc. and have been researched and analyzed by Jonathan Scheid, Chief Investment Officer, Bellatore Financial, Inc.

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