Last month the unemployment rate dropped to the lowest level it has been since 2001. The Labor Department estimates that an average of 156,000 new jobs has been added each month for the past three months. This increase in new jobs dropped the September unemployment rate of 4.6 percent to 4.4 percent in October. This also shows that the US economy is still reasonably strong even though certain jobs, such as housing and manufacturing, have been the weakest links in the job market. Economists are saying that due to the lack of education and skills by some workers, any unemployment rate below 5 percent is commendable.
One problem some investors are worried about is that due to the increase in hourly wages, which has increased by almost 4 percent since October 2005, some companies might suffer from high labor expenses and weak productivity growth. However, one obvious problem that could end up raising the unemployment rate next year is the increasing layoffs that the auto companies and manufacturing companies are having. I was an employee of a manufacturing company for a couple of years, and within those two years three of our manufacturing lines got shut down. The reason is because they got bid out to China and Mexico due to the cheap labor and minimum benefits. Builders and retailers are also cutting jobs, though not to the same extent as the auto and manufacturing companies, but the housing layoffs have not yet caused problems for the rest of the job market. However, even with the increasing layoffs in the housing, manufacturing and auto companies they were more than offset by the hiring in education, government, health care, etc.
If there was just a way to keep our manufacturing and auto companies from bidding out, then we might get our unemployment below the 3.8 percent mark, which is the lowest it has been since the new millennium. Hopefully we can decrease the unemployment rate lower or at least maintain it, which would mean that the jobs in education, government, health care, etc. are going to have to continue their current hiring rate in order to offset the manufacturing, housing and auto job losses. However, as long as other countries can keep low employee wages then it is going to be hard to keep the unemployment rate under 5 percent. Actually, a lot of companies in China are helping in keeping the wages lower so that they can continue to receive the manufacturing jobs from here in the United States. It’s not all the companies fault, because Americans are also part of the reason as to why jobs keep getting outsourced. The reason is because, and I am definitely guilty, we substitute low price over better quality! So until Americans are willing to pay more for products, and companies are willing not to outsource and cut some of their profits, then it is going to be very difficult to continually decrease the unemployment rate.