Three Things We Haven’t Seen Before

Three Things We Haven’t Seen Before

by David Reavill

Three significant events occurred this year that we’ve never seen before.  And each will impact our view of Next Year’s Economy.

First, The Puzzle Of The Missing Workers

The first is the puzzle of the missing workers. There needed to be more workers to fill all of the open positions. These job openings were especially true as 2022 began when the economy was more robust than it is now.

Financial pundits spent hours trying to explain just why this was so. Would people rather stay at home than go to work? Was there a growing sense of antisocial behavior following the Covid Lockdown and social distancing? Were there lingering effects of “long Covid” that made people too ill to go to work?

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These reasons were suggested as the number of “help wanted” signs grew. At first, 10 million jobs went without someone to fill them. Then the number of open positions grew to 11 million, far and away the most significant number of available posts we’ve ever seen.

The reality is that we had between 300,000 and 500.000 fewer workers throughout 2022 than we did in 2019, the year before the pandemic. And this is even though today’s population is more than three million people larger.

It is reasonable to presume that today’s labor shortages are due, at least in part, to the Covid Pandemic either directly or indirectly is responsible for making a sizable amount of the population unable to work. In the latest reported numbers from the CDC, Covid Deaths have once again exceeded 3,000 per week. The number of reported new cases is more than 400,000,  also a weekly number.

However, direct infection by Covid-19 is not the only risk today’s workers must bear. The Vaccine Adverse Event Reporting System indicates that over 2 million people have had various adverse effects from the vaccine. Many of which would prevent those individuals from going to work. Another likely reason for the reduced American labor force.

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So while all the reasons are unknown, many of those factors may be unique to the individual. It is essential to recognize that we are entering 2023 with fewer workers compared to the overall population in over 40 years. You have to go back to the “stay-at-home moms” era to find this number of people that were not working.

Second A Judgment Call: Recession?

You’ll be happy to know that according to the nation’s official judge of such things, we have not been in a recession for 13 years. That’s right. The National Economics Research Bureau is the umpire when it comes to recessions. The NBER calls the balls and strikes if you will. They determine whether or not the nation has fallen into an economic contraction, generally called a recession.

And they will go to great lengths to tell you they have no set criteria. Still, its generally assumed that two consecutive quarters of negative economic growth constitute a recession. This year we began with a negative 1.6% growth rate in Quarter number one and then a 0.6% growth rate in Quarter number two.

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That’s as close to two consecutive quarters of negative growth as possible. But not to our official “umpire,” the NBER.

Incidentally, this call followed another irregular period. That second quarter in 2020, the one at the height of the Covid Pandemic, saw the economy fall at the most incredible rate in history. More than even the Great Depression of 1929. Granted, it was only one-quarter of the decline, but don’t you think that when the economy is falling by nearly 30%, that should be labeled a recession?

Not according to the NBER, it, too, was not considered a recession.

Once again, the National Bureau of Economic Research decided to sit on its hands.

These last 13 years must have been a much better economy than I thought!

Third: A New Interest Rate Record

Finally, we come to a new American Record in Interest Rates. In 2022, the Federal Reserve set the all-time US Record for raising rates. The Paul Volcker Federal Reserve held the old record. In 1979 – 81 the Volcker Fed doubled the Fed Funds Rate from over 9% to 19%. They then doubled the effective interest rate, and their record stood for 41 years.

But this year, that hearty group with the Powell Fed increased the effective Fed Funds Rate from less than 1/4% to over 3 3/4%. That’s an increase of more than 18 times. What’s more, today’s Fed achieved its goal in less than a year. In contrast, raising their rate took the Volcker Fed more than two years.

So hats off to today’s Jerome Powell Federal Reserve, the champions at raising interest rates and slowing the economy.

Econ Briefs