Tags: Rosenberg | labor | market | productivity

Gluskin Sheff's Rosenberg: Labor Market Remains Weak

By Dan Weil   |   Friday, 07 Feb 2014 07:30 AM

The economy as a whole is on solid ground, but the labor market is a trouble spot according to David Rosenberg, chief economist at Gluskin Sheff + Associates.

"Labor force growth in the past year is running at a fraction of 1 percent as is productivity, which means we have a historically extremely depressed potential growth rate on the supply side of the economy," he said in congressional testimony this week, CNBC reported.

The unemployment rate dropped to 6.7 percent in December, but the labor force participation rate came in at a 35-year low of 62.8 percent.

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"Only three other times in the past six decades has the unemployment rate fallen this far this fast," Rosenberg noted.

"Today we accomplished this feat with only 2.4 percent growth, which is disturbing because it means that it is not taking much in the way of incremental economic activity to drain valuable resources out of the labor market."

Businesses aren't investing enough, Rosenberg explained. "The data tell us that we have seen inadequate real business fixed investment to the point where the erosion in the capital stock is now impairing productivity growth."

Meanwhile, the Labor Department reported Thursday that jobless claims dropped by 20,000 to 331,000 in the week ended Feb. 1.

"When you look at the labor market, job destruction has been very, very low," Scott Brown, chief economist at Raymond James, told Bloomberg. "It's really been an issue of new hiring. That hiring, we think, is gradually picking up."

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