The US economy is standing on shaky ground, warns renowned forecaster Danielle DiMartino Booth, citing ominous signs in the labor market that threaten to derail the country’s economic momentum. A closer examination of the job market reveals a troubling trend: a growing number of workers are exhausting their unemployment benefits, while part-time employment has reached unprecedented levels. This could ultimately lead to a pullback in consumer spending, sending the economy into a tailspin.
Booth, founder of QI Research, points to the alarming rise in workers taking more than 27 weeks to find new employment, up 3% from last year. The average duration of unemployment has also climbed to 21 weeks, according to government data. Furthermore, the number of part-time workers has surged to a record high of 28.2 million, suggesting that the job market is not as robust as it appears.
The proliferation of part-time jobs, often linked to the gig economy, has created a false sense of security, Booth argues. Many out-of-work Americans are turning to platforms like Uber to make ends meet, rather than seeking full-time employment. This shift has significant implications for consumer spending, which is already showing signs of weakness.
Federal Reserve economists are keeping a close eye on consumer spending, which has been flat or declining in most districts, according to the latest Beige Book. The ripple effects are already being felt in key industries, with manufacturing contracting for 21 out of the last 22 months and housing sales dropping 2.5% in August.
Booth predicts that investors will see further signs of economic weakness in the upcoming GDP figures, which may be revised downward. Despite expectations of 3% growth last quarter, Booth remains skeptical, citing a recent revision that showed the economy added nearly a million fewer jobs than expected in the year leading up to March 2024. Her warnings of a recession come as a stark contrast to the optimism of many on Wall Street, who are betting on a soft landing.
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