Recent Job Creation

Last month more jobs were created in the nation’s private non-farm sector than economists predicted.  According to the ADP’s National Employment Report the entire private sector added 135,000 jobs in September, 10,000 more than WSJ economists were anticipating.

67,000 of these new positions are in large businesses and medium sized businesses added 39,000 jobs.  Small businesses also did well with an additional 30,000 new jobs.

Despite the fact that there are significant problems within America’s economy, the job market is on solid footing.  Unemployment has remained at the same 3.7 percent and there have been 107 months of continued job growth.  In addition, salaries have gone up by 3.2 percent over the last 12 months and unemployment rate in minority groups has decreased (African-American unemployment dropped .5%, a record low data since 1972.

So if there are issues with the US economy (which there are), as long as job creation continues to rise, so does optimism alongside it.

Growth of US Economy

The US Economy has enjoyed expansion recently in many sectors.  The two we will specifically look at here are: the Internet and beer.

In 2018, approximately 10% of America’s GDP came from the internet.  $2.1 trillion money was made from this sector according to estimates from The Internet Association.  This represents America’s fourth largest economic sector (1-3 being real estate, government, manufacturing).  The Internet provides almost 6 million (direct) jobs – 4 percent of all of America’s jobs and 13 million (indirect) jobs. $64 billion was spent by internet companies in capital expenditures.

In 2018, according to numbers from the Brewers Association approximately $79.1 billion was contributed to the American economy by craft brewers. This translates to around 0.4 percent of America’s GDP.  It is 4 percent higher than the contribution from craft brewery in 2017. The contribution from small and independent brewers was also significant with the provision of 559,545 jobs, 150,055 of which were directly from breweries.

Increase in Retail Spending

May 2019 saw an escalation in spending by US shoppers.  This had provided “critical fuel for the U.S. economy’s continued expansion despite trade tensions and slowing global growth.”  According to the US Commerce Department, the increase in retail stores was 0.5 percent from April to May.  There was an increase in April too which was slightly higher than the department’s estimate.  All of these figures show that household spending is high and on the up.

Other good news is that almost all categories (in particular auto sales at 0.7 percent) showed improvement and real gains.  There were some declines (within the food and beverage industry, as well as apparel, department stores and the like) but overall the message was growth.  Electronic stores possibly had one of the best months with an impressive growth of 1.1 percent in May. Health, wellness and personal care jumped too.  Another high gainer was “nonstore” (online, catalogue, direct) retail sales, with a statistic growth of 1.4 percent for May.

According to a recent Market Watch article, this:

“may allow the Federal Reserve to wait a bit before cutting interest rates. After the weak job report for May, some economists thought the Fed might ease as soon as next week to bolster what was perceived as a slowing economy. The market is now expecting the Fed to cut rates in July. Some prominent economists, like the team at Goldman Sachs, think expectations of a rate cut over overdone and the central bank will remain on hold this year.”

The hope of course was that this trend would continue but earlier this month it seemed that “renewed trade tensions tapered optimism and smaller gains in employment suggested slower economic growth.”

Small Business Week

Small Business Week (held from May 5-May 11 this year) is organized by the US Small Business administration.  established in 1983 as a “national recognition event”, from then until now it is a chance for every American to shop local.

But it is so much  more than that.  this year for example, everyone was invited to participate in a free virtual conference over the first two days. in conjunction with SCORE Association, the SBA gave people the opportunity to network with other business owners, connect with industry experts and be involved in a hands on conference without having to actually leave their homes. Other events included: Small Business Week Hackathon; the National Awards Ceremonies and the NSBW Twitter chat.

During this week individuals are also encouraged to give small businesses attention and respect as well as buying their services/products.  America comprises over 30 million small businesses, providing jobs for 59 million Americans.  This is over a third of the entire workforce in the country and accounts for approximately 44 percent of the US GDP.

And Trump is a big supporter also.  He said his administration is: 

“A strong ally and advocate of small businesses and their ability to help America reach its full economic potential.”

Which is supported by the provision of the Tax Cuts and Jobs Act which lets small business owners deduct 20 percent from their taxable business income. Trump also issued Executive Order 13771 (E.O. 13771): “Reducing Regulation and Controlling Regulatory Costs [requiring] For every new regulation issued, at least two prior regulations be identified for elimination. [In addition] The cost of planned regulations [must] be prudently managed and controlled through a budgeting process.” 

Bolstering America’s Economy Through Technology

Technology is good for the economy

Technology is good for so many aspects of society.  One of them is preservation and growth of an economy.  In a new book written by MIT economists Jonathan Gruber and Simon Johnson entitled, ‘Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream, the two make the case for the benefits of investing in bolstering technology into the economy.

They argue that as well as strengthening growth, supplementing investment in science results in better job opportunities and higher wages.  This is especially useful now when so many Americans believe their salaries are not conducive to their everyday expenses.  Johnson said:

“Good jobs are for MIT graduates, but they’re also for people who don’t finish college. They’re for people who drop out of high school. There’s a tremendous amount of anxiety across the country.”

According to Bloomberg’s US State Innovation Index, California is America’s “most innovative economy” based on the following factors:

  1. STEM jobs
  2. R&D
  3. Firms in technology
  4. Productivity
  5. Individuals who have science/engineering degrees.

Perhaps therefore not surprisingly – supporting Johnson and Gruber’s theory – a CNBC article found that California accounted for almost ¾ of non-farm jobs created in America in February; an additional 14,600 (nonfarm) jobs were added by the state last  month; a report found that nonfarm payrolls in America increased by 20,000 jobs. Furthermore, Forbes contributor Mike Montgomery found that “technology can help prevent future California wildfires.” So there really is a lot to be said in favor of the benefits of technology for a state (and country’s) economic welfare.

Cyber-Enabled Economic Warfare and America’s Private Sector

In this video, presented by Samantha Ravich, Deputy National Security Adviser to Dick Cheney as well as Chair of the Foundation for Defense of Democracies, Transformative Cyber Innovation Lab and Vice Chair of the President’s Intelligence Advisory Board, a discussion is held on cyber-enabled economic warfare. 

US State Expenditure Hike

According to the annual state expenditure report of the National Association of State Budget Officers (NASBO), there was an increase in US state spending – a first for the 2018 fiscal year.  Industries most impacted were health and transport (6.5% possibly due to an increasing focus on infrastructure throughout the nation) but in every category there was growth.   There was a 6.2 percent hike in general fund revenue during the same time frame.

Executive director of NASBO, John Hicks explained:

“The fiscal 2018 data presents a slightly improved fiscal situation than the prior two years. We’re seeing a slight increase in the growth of spending both from total spending and states’ own funds.”

In addition, there was a more substantial increase in federal fund state spending as compared to state generated revenue spending.   And activity within the manufacturing industry did not meet expectations, dropping to its nadir since April 2017.  According to Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee:

Demand remains moderately strong, with the New Orders Index easing to below 60 percent for the first time since April 2017, the Customers’ Inventories Index remaining low but improving, and the Backlog of Orders Index remaining steady. Consumption softened, with production and employment continuing to expand, but at lower levels compared to September.”

US Digital Economy: Women all the Way

It seems like women are leading the way in the US digital revolution.  The yearly 2018 Bank of America Women Business Owner Spotlight showed that there is a lot of optimism among female entrepreneurs with a staggering 49% of them expecting an improvement within their local economies and 48& to expect this from the national economy.

In general the women are confident: about the economy, about their success in the economy and about elevation in future growth within their particular positions.  In addition, 56 percent of women are planning to expand their businesses within the next five years. According to Managing Director and head of Small Business, Bank of America, Sharon Miller:

“When it comes to small business, women entrepreneurs are at the forefront of the digital transformation. It is exciting to see how they are innovating and leveraging mobile tools to help their businesses succeed. Their increased optimism about the future and the potential for hiring and growth is also very encouraging.”

Digitally, half of all SME owners predict a total switch to digital payments within the next five years and the women seem to be in charge of this, with mobile devices processing payments and engaging in transaction management. Indeed only 26 percent of men use mobile devices to process digital fiscal transactions whereas 33 percent of women do.

 

US Economy: Winners and Losers

In this video, Ali Velshi and Stephanie Ruhle join Heather Long, Economics Correspondent for the Washington Post, to discuss latest tax projections and who they benefit. They review how the tax breaks fit into the overall economy. As things stand now, Congressional Budget Office forecasts an economic slowdown, partly due to President Trump’s Trade War.

Measuring US Economic Success

The Bureau of Economic Analysis on July 27th released the gross domestic product (GDP) growth rate for the second quarter of 2018: 4.1 percent.  Everyone has been very excited about this.  It is, after all, a greatly impressive figure, indicative of tremendous growth as compared to  the past few years.  However, according to a recent article by Sophie Mitra, not only does it not tell the whole story, the part of the story that it does tell could be problematic for the average family.  We have to first realize that:

“GDP has many limitations. It captures only a very narrow slice of economic activity: goods and services. It pays no attention to what is produced, how it is produced, or how it might improve lives.”

She pointed out that at the end of the day, what the average American is bringing home in their pay packet each month has remained stagnant “for decades,” irrespective of the fluctuation of GDP and/or unemployment.

Many economists actually believe that “economics considers wealth or the production of goods and services as means to improve the human condition,” and rather it is simply the media that is obsessed with GDP figures.

However, President Trump’s top economic advisor, Larry Kullow insists that the GDP noise “is a boom that will be sustainable,” with Trump himself boasting that “his administration has achieved an ‘economic turnaround of historic proportions’.”

Even if we do consider GDP the be-all and end-all measuring stick of economic success and prosperity, was this all Trump’s doing?  According to a Bloomberg article by Sho Chandra, probably not, since:

“The stars were aligned following 2 percent growth in the first quarter: The biggest tax overhaul since the Reagan era delivered another boost to consumer spending and business investment, and the volatile categories of inventories and trade probably juiced the number — helped by a likely temporary jump in soybean exports ahead of retaliatory tariffs.”

At the end of the day the current GDP number is a nice one but as Mitra pointed out it is much more accurate to engage “complementary measures” involving people as well as products, as an analytic tool.