There is no new economics, just the old stuff we know

The US jobless claims numbers just hit a 49 year low. US wages are rising – above the inflation rate thus real wages are rising. The two together showing us that there is no new economics, there’s just those old things we know.

When unemployment is low, economic growth is happening, then wages will rise. When there are lots of unemployed people around then wages won’t rise. There’s nothing new to this, this is so old and obvious that even Karl Marx managed to get it right. There’s also no great secret to it, it’s just supply and demand. When demand for workers is high and the supply of new or not already employed ones low then the price will rise. Those Econ 101 charts at the beginning of every text book really are reflecting this reality we inhabit.

The number of Americans filing applications for jobless benefits tumbled to near a 49-year low last week, which could ease concerns about a slowdown in the labor market and economy. Initial claims for state unemployment benefits dropped 27,000 to a seasonally adjusted 206,000 for the week ended Dec. 8, the Labor Department said on Thursday. Last week’s decline in claims was the largest since April 2015. Claims hit 202,000 in mid-September, which was the lowest level since December 1969.

It’s actually half the rate of 1969.

Not that many people getting fired these days – FRED, public domain

The workforce, at 80 million or so, was in 1969 about half today’s 160 million. So, the same number of jobless claims is about half the rate.

And as I’ve said elsewhere, this means there is no new economics:

It’s entirely true that we don’t know economics well enough to know everything but we do indeed know some things. The old verities apply simply because they are verities.

We could even assume – we’d be wrong to do so but go with it – that real wages haven’t risen for 40 years. That the rich have taken all the growth. Well, what should we do about it? Actually, we’ve already done it, haven’t we? We’re back at full employment, the workers’ wages are rising. Whatever it was that we needed to do we’ve done. No need therefore to upturn society and the economy with this new stuff, the old is working just fine.

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