This summer did you see the headline, “Black/African-American Teen Unemployment Reaches the Lowest Level Ever Recorded?” Neither did I.
But, it happened. After hitting 48.9% in September 2010, the rate dropped to 17.7% in July. Defying economic conventional wisdom, most of the drop did not occur at the beginning of the recovery but in the past three years since the rate was 33.8% in June 2016. This is only one statistic among an avalanche of good news about the economy, and the poor leaving poverty.
First, we should get on our knees and be thankful that the period of economic growth we are experiencing is the longest on record. The Trump Administration has accomplished something never before seen in America. Based on all previous historical trends, we should be in a recession right now and the odds of us entering one any day are extremely high.
For now, let’s relish in the good news, especially what hasn’t been widely reported. Current policies are allowing lower-paid employees to experience a greater level of wage growth than the higher paid, and as Yahoo Finance reported: “This economy isn’t just adding jobs, it’s adding good ones.” Goldman Sachs and the NY Federal Reserve Bank also published analyses showing larger salary increases at the bottom of the wage scale.
The Labor Department recently published wage growth of 3.1%. More detailed analysis showed that wage income actually increased 5.5%. The reason for the discrepancy is that the 3.1% is calculated by simply dividing one month’s total wages over the same month a year earlier. However, because a large number of Baby Boomers are retiring, when someone earning $80,000 leaves the workforce and is replaced by a new hire earning $40,000, that shows up as a loss in wages. If the same person went from a salary of $80,000 to $40,000, that would be a huge wage cut, but when it is two separate people, neither experiences a cut at all.
Interestingly, there are some countervailing forces working against job growth, and they are hurting. New York City established a $15 minimum wage, a 36% increase since 2016 and a 107% increase since 2013. Imagine if a major item, such as groceries, in your household budget increased by 107% in six years. You would find a way to spend less on groceries, and that’s what NYC companies have done with low-wage employees. NYC lost 6,000 restaurant jobs, a larger cut than when the recession first hit. Thirty-six percent of restaurants have laid people off and 77% have cut employees’ hours. Meanwhile, in locales without the artificially high minimum wage, restaurant employment continues to grow.
In the corporate world, once the Trump Administration reduced what was one of the highest corporate tax rates in the world, American companies who had fled are coming back. Mylan moved its corporate address to the Netherlands in 2015, but it is returning. Allergan had changed its address to Ireland, but it is also coming back. Many other American companies, such as Eaton and MedTronic also left from 2012 to 2015.
Economic growth depends on productivity, but another major factor is faith. So, I encourage you to ignore overly pessimistic headlines. Work hard, spend less than you earn, and invest the rest. That should allow our economic growth to continue.
