In yet another sign that the US economy has finally turned around, the overall jobless rate in the Unites States has continued to sink. While this is old news when it comes to states like Texas, Nebraska, or North Dakota, what is really eye-catching is the trend in states like California. You have to understand that for the longest time during this current economic recovery, California has largely been exempt. Its unemployment rate is much higher than the national average. While it is nowhere close the record high unemployment in Nevada, it is still quite bad. In fact, Nevada, Arizona, and California tend to have unemployment rates within a tight range.
Well, the good news is that the unemployment rates in these crucial South Western states have started trending downwards. California now has a 6.7% unemployment rate while Nevada has a 7.1% unemployment rate. While these are nothing to write home about compared to the national average of 5.5%, they are definitely a marked improvement from previous unemployment levels. This leaves us with an inescapable conclusion that, at least when it comes to employment, the economic picture is definitely getting brighter.
However, it is still worth noting that part of the reason why the unemployment rate is dropping across the board is that a record number of Americans, in fact, more than a 30-year high number of Americans, is no longer looking for work. For some reason or another, they just have stopped looking for work, and this has artificially decreased the unemployment rate. A lot of demographers are now resigned to the fact that this may be a long-term trend. We may need to take out that qualifier “artificial” and say that this is the real unemployment rate.
Regardless, the big danger after this is what impact this would have on wages. If the labor pool shrinks dramatically enough because there is a huge chunk of people who are not looking for jobs and those who are employable already have jobs, the labor pool might shrink to such a degree that wages would start rising. While normally, rising wages are a good thing especially on the consumer side, this can definitely be a very bad thing when it comes to stock prices as well as inflation rates and, ultimately, the economic recovery itself.