Tag Archives: U. S. Economy

Enforcing The Law Has Consequences

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On Saturday, The Conservative Treehouse posted an article about a yacht club on Long Island that was forced to close its restaurant because the staff was deported due to immigration enforcement.

The article reports:

The larger picture is well worth discussing, because there is a large and inorganic part of the U.S. economy that will obviously be impacted by immigration enforcement and the removal of illegal or unauthorized workers.

If you business model won’t work without illegal cheap labor, maybe there is a problem with your business model.

The article notes:

There are resorts and venues operating in the USA which never would have been built without a foundation of foreign labor to service them.  Take that labor force out of the economy and things will significantly change.  This outcome is both predictable and necessary to reset the labor market.

As all of these foreign workers are removed there is going to be massive pressure on the wage rates for American workers.  That’s a great benefit.  Simultaneously, there’s also some businesses that will never survive without that foreign labor pool because the business model itself was built upon a false foundation.

Most of the time we think about the service industries with workforces that are significantly staffed with foreign workers.  Hotels, resorts, restaurants, vacation destinations etc.  Many of these locations currently operating would never have found capital or investment in a true economy that was not built on illegal immigration, visas or foreign workers.  There are likely hundreds of resorts that exist only because the labor market is inorganic.

With a predictable rise in wages comes the increased operating costs and diminished profit return for the investors and owners.  This can have a major impact, but again, this outcome is due to fraud in the underlying business model.  Those businesses likely would never have started and the investment never would have been capitalized without the fraud it is dependent upon.

Take out the illegal aliens; remove the H1B visas and all other ancillary visa approvals and remove the protected status returning foreign workers to their country of origin, and U.S. wage rates and benefits will quickly increase as companies try to find a way to shift to a business model built upon real economics.

This rise in wages will be significant and that can create an inflation increase.  As wages increase in price, the operating costs increase.  The per unit business model then must adjust and things like hotel rooms go up in price.  As resort prices increase, they become unaffordable to the current target customer, that leads to lower sales and decreased revenue.  However, that natural dynamic also returns organic competition to a market that has been missing competition for decades.

It’s not just about the service industries.  As the labor market contracts, wage rates for blue collar construction and manufacturing jobs also increase.  This can lead to higher consumer prices during the painful phase as the natural market balance is restored.  Again, many businesses will not exist because many businesses never would have existed without the baseline of imported foreign workers.

It is time to enforce the law so that American workers can take these jobs and be paid what the jobs should pay.

Some Good News About The Economy

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On Wednesday, CNBC reported the following:

  • Gross domestic product jumped to 3% for the second quarter, better than the 2.3% estimate and reversing a 0.5% decline in the prior period.
  • Consumer spending rose 1.4% in the second quarter, better than the 0.5% in the prior period.
  • While exports declined 1.8% during the period, imports fell 30.3%, reversing a 37.9% surge in Q1.
  • President Donald Trump responded to the GDP report with a fresh demand for the Federal Reserve to lower interest rates.

In another article posted on Wednesday, CNBC reported:

  • Private payrolls rose by a seasonally adjusted 104,000 for the month, reversing a loss of 23,000 in June and topping the Dow Jones forecast for an increase of 64,000.
  • Wages rose at a 4.4% annual pace for the month, about in line with recent trends.

The first article mentioned reports:

The U.S. economy grew at a much stronger-than-expected pace in the second quarter, powered by a turnaround in the trade balance and renewed consumer strength, the Commerce Department reported Wednesday.

Gross domestic product, a sum of goods and services activity across the sprawling U.S. economy, jumped 3% for the April through June period, according to figures adjusted for seasonality and inflation.

That topped the Dow Jones estimate for 2.3% and helped reverse a decline of 0.5% for the first quarter that came largely due to a huge drop in imports, which subtract from the total, as well as weak consumer spending amid tariff concerns.

Financial markets reacted little to the report, with stock index futures mixed and Treasury yields higher.

“The word of the summer for the economy is ‘resilient,’” said Heather Long, chief economist at Navy Federal Credit Union. “The consumer is hanging in there, but still on edge until the trade deals are done.”

The second article reports:

Hiring at private companies rebounded at a stronger than expected pace in July, indicating the labor market is holding its ground, ADP reported Wednesday.

Payrolls rose by a seasonally adjusted 104,000 for the month, reversing a loss of 23,000 in June and topping the Dow Jones forecast from economists for an increase of 64,000. The June number was revised up from an initially reported loss of 33,000.

Though the pace of hiring is well off where it stood last year, the June total was the best since March and consistent with a slowing but still fairly vibrant jobs picture.

“Our hiring and pay data are broadly indicative of a healthy economy,” ADP chief economist Nela Richardson said. “Employers have grown more optimistic that consumers, the backbone of the economy, will remain resilient.”

At the present time, it looks as if hiring a businessman as President was a good choice for the economy.

Elections Matter In Economics

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Townhall posted an article today about the economic recovery in America after the coronavirus.

The article reports:

The U.S. economy added 850,000 jobs in June while the unemployment rate rose to 5.9 percent according to the latest data released Friday morning from the Department of Labor’s Bureau of Labor Statistics. 

Among the industries with the most notable growth — as more states lift restrictions put in place due to the Wuhan coronavirus — were leisure and hospitality, public and private education, and professional and business services.

The article notes the impact of the increased unemployment benefits:

The stronger-than-expected job growth is due in part to states that have ended expanded or extended federal unemployment benefits that often incentivized citizens to stay out of the workforce. As the Wall Street Journal noted recently, the number of Americans taking unemployment benefits is “falling at a faster rate in Missouri and 21 other states canceling enhanced and extended payments this month, suggesting that ending the aid could push more people to take jobs.”

As June’s employment data demonstrates, ending the extended benefits did push more people to enter the workforce because, for some, it was no longer more financially beneficial to avoid returning to work. 

The article concludes:

These states, unsurprisingly, are almost all led by Republicans. Even Politico noted that, when it comes to the 15 states that have already returned to pre-Wuhan coronavirus economic activity, “12 are led by Republican governors.” On the flip side, “the 10 states reporting the lowest levels of activity since January 2020, seven — including New York, Pennsylvania, and Illinois — are run by Democratic governors.”

The data from these states, along with today’s jobs report for June, suggest conservative leadership and policies are a significant predictor of a strong economic recovery.

The Republican National Committee recently heralded the economic growth in GOP-led states based on Labor Department data that found 18 of the top 20 states for jobs recovered since COVID hit have Republican-controlled legislatures, as do 17 of the 20 states with the lowest unemployment. 

The workforce participation rate is unchanged from May–it is holding at 61.6 percent.

Good News On The Job Front

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The Labor Department’s Bureau of Labor Statistics released its jobs numbers for June this morning. CNS News posted the numbers.

This is the Labor Force Participation Rate chart taken from the Bureau of Labor Statistics:

As you can see, the Labor Force Participation Rate is fairly steady and moving upward.

Meanwhile, the article at CNS News reports:

The U.S. economy added 220,000 jobs in June, the best showing since February and well above analysts’ expectations of 174,000.

The Labor Department’s Bureau of Labor Statistics also said the number of employed Americans — which set records in February, March and April — set another record in June, at 153,168,000 employed.

And the number of Americans not in the labor force — after four straight monthly gains – dropped a bit to 94,813,000.

There is still a lot that needs to be done to put Americans back to work, but we are moving in the right direction. Cutting back on federal regulations should help stimulate the economy, but that impact of cutting those regulations may not be immediately felt.

The article further reports:

Over the past 3 months, job gains have averaged 194,000 per month.

In a June 29, 2017 update, the Congressional Budget Office said it expects the U.S. labor market to tighten in the next two years, as greater demand for workers will push the unemployment rate down and the labor force participation rate up.

The projected demand for workers will encourage more people to participate in the labor force, temporarily offsetting the projected decline in participation arising from such factors as the ongoing retirement of baby boomers.

CBO projects that the unemployment rate will remain around 4.3 percent by the end of 2017 and then drop further to 4.2 percent in early 2018.