I haven't shown this chart for several months now, mainly because it wasn't telling us anything new—hiring activity had turned up a bit, but was nothing to write home about. In the past few months, however, there has been a very impressive pickup in the mining index. The mining sector (which includes mining, quarrying, and oil and gas extraction) is on fire, which further suggests that the broad-based strength in commodity prices reflects a good deal of genuinely strong demand. Speculation can be practiced by commodity producers just as easily as by commodity purchasers; a producer has merely to keep his stuff in the ground rather than dig it out and sell it. If producers were speculating on higher prices they wouldn't be so eager to hire people to get the stuff out of the ground. But if they see their orders running much stronger than expected even as prices rise, then they would be eager to ramp up production.
It's been hard to quantify the contributions of easy money and supply/demand to commodity prices, and tempting to lay the lion's share of the blame on easy money and the weak dollar. This data suggests that the contribution of strong demand should not be underestimated. That in turn keeps the scales from tilting too much in the direction of inflation and instead more balanced between inflation and growth, and that's relatively good news.
The disparity in highs and lows on this chart also illustrate one reason why it is taking so long for the economy to recover. It's not easy at all for workers to shift out of the flagging real estate and finance sectors into the mining sector. The economy has shifted gears in a rather radical fashion that doesn't lend itself to an equally radical shift in the resources of the labor force.
Mark Perry has some more detailed commentary on the Monster index here.
I really don't see a sustained recovery in the labor market until construction, residential, commercial and public improves. This labor market is still in a depression, reporting unemployment rates in the 20% range. Although housing may only be 2% of GDP, construction affects so many people and industries that I think that's where we have to see the improvement. It may take another 5 years according to my contacts in the industry before we see a real recovery.
ReplyDeleteAs you point out there is a large shift in the composition of the job market that will complicate recovery. As the economy grows along a new trajectory constraints in the labor market will affect wages long before unemployment reaches 6%. Slack is another one of those macroeconomic concepts that disguise the underlying reality. Skills are wrong, people are located in the wrong places and skills are becoming obsolete as administration policies retard the recovery. Add to that policies that reduce marginal incentives to work and you get full employment at maybe 7.5%.
ReplyDeleteMining is on the pickup globally -- Americans who are unemployed today will likely never work again in the US, which means emigrating to foreign countries with their families in order to make a new life -- here's link to a global mining recruiting website -- you will find plenty of mining jobs in Africa for example:
ReplyDeletehttp://www.mining-recruitment-jobs.com/mining/index.php
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