Hiring has been slowing in some business sectors, but government, education & health, and construction sectors kept the BLS unemployment rate at a historic low of 3.6 percent per the MarketWatch graph.
American governments and construction are hiring because the Infrastructure, Inflation Reduction and CHIPS Acts are modernizing the US economy for the first time in more than 70 years.
This is what should happen when the private sector hasn’t been investing in the future. So-called Capex, or capital expenditures, have been low for years, and now with raising interest rates they will invest more when governments come along.
It happened during the 1930’s New Deal and after World War II, before government retreated to mainly support Social Security and Medicare, as well as the mortgage industry to create the post-war housing boom.
Reaganomics and the conservatives’ “deficits don’t matter” crowd took over in the 1980s with massive tax cuts as well as spending cuts in favor of stock buybacks and enriching corporate CEOS.
Capex spending (funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment) plunged to almost zero (0.8 percent) in Q1 2023 per the St Louis FRED graph, which shows the sharp plunge in capital expenditures after 1980. And no country can take care of its citizens if most of its private capital goes to boosting stock buybacks and corporate profits.
Global Finance Magazine touted the increased capital spending everywhere today, not just in the US, since the pandemic:
“Despite concerns that economic growth may slow as central banks tap the brakes to combat inflation, companies around the globe are in a spending boom for capital such as factories and for things like digitalization and automation, 5G networks and the transition to clean energy.”
And this spending should continue for the rest of this decade, given the $Trillions allotted to American industry to do the job, and a fully employed economy. Even the government’s latest JOLTS report (Job Openings and Labor Turnover Survey) out last Thursday showed almost 10 million job vacancies waiting to be filled.
Harlan Green © 2023
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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