We spoke to the continued strengthening economy, broadly speaking, in our last semiannual employment update. After two more quarters of data, Kaulkin Ginsberg’s market intelligence team remains optimistic about the current U.S. employment environment. This will assuredly lead to significant increases in the overall spending, eventually driving debt accumulation throughout the economy, increasing revenue potential for and necessitating ARM services.
The chart below titled Current Employment Snapshot reveals a few year-over-year metrics, highlighting the boosting economy. Most importantly, the labor force participation rate and employment-population ratio both increased, while the U3 and U6 rates both declined drastically over the past two years since Q4 2014.
However, there are still some serious flaws with the current employment snapshot, namely:
- The labor force participation rate is significantly lower than its height throughout the 1990s and early 2000s. Specifically, it fell from 65.9% in Q4 2007, the beginning of the Great Recession, to the 62.7% in Q4 2016, listed above. This skews the U3 rate, the most commonly referenced unemployment measurement, since it only takes into account the labor force – not those who outside of it. However, the U6 rate helps account for this skew by including part-time workers and those marginally attached to the labor force (e.g., those who stopped looking for employment for economic reasons). Additionally, the labor force participation is, in of itself, quite broad as it doesn’t account for individuals who don’t desire to be a part of the labor force, such as retirees or college students.
- Another major flaw with the current employment snapshot is the continued increase of those not in the labor force, which is one of critics frequently pointed out measurements. Those not in the labor force are generally excluded from the usual employment climate discussions, as mentioned in our previous point, but it may be a serious problem for the economy if these individuals are simply unable to search for and find employment opportunities. It’ll be quite interesting to see if this measurement rebounds over the next four years, as Pres. Trump seeks to further stimulate and boost the economy and, specifically, employment.
In all, Kaulkin Ginsberg believes the economy has, more or less, recovered from the Great Recession nearly a decade ago, which is evidenced by the Federal Reserve’s announcement to raise interest rates yet again this month – its third in the last year and a half, and second in the last four months. Overall, the ARM industry should benefit in the short-term by borrowers being better able to repay existing debts, in addition to, benefitting in the long-run as many individuals will accumulate excessive and non-repayable levels of debt, driving creditors and lenders to outsource ARM specialties.
Through KG Prime, Kaulkin Ginsberg’s market intelligence service, we provide continual market-related and economics updates with analyses tailored specifically to the ARM industry. For more information about how your company can access timely ARM research to help you make decisions about growth, please contact us.
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