I think the premise the economy will 'pick up' is highly questionable. Furthermore I think we will see very low interest rates in the US and Europe for a long long time.
I've seen other reports saying that unemployment rate have gone down and also companies hiring is low. Which is pretty bad imo.
But I'm curious to see if there are any other indicators that the economy is not going to pick up any time soon.
In The Netherlands the unemployment rate fell not because there are more jobs, but because people are exiting the labor force ( retirees, baby-boom ).
edit: typo
U1: Percentage of labor force unemployed 15 weeks or longer.
U2: Percentage of labor force who lost jobs or completed temporary work.
U3: Official unemployment rate per the ILO definition occurs when people are without jobs and they have actively looked for work within the past four weeks.
U4: U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
U5: U4 + other "marginally attached workers", or "loosely attached workers", or those who "would like" and are able to work, but have not looked for work recently.
U6: U5 + Part-time workers who want to work full-time, but cannot due to economic reasons (underemployment).
From a longer blog post: http://www.harrowell.org.uk/blog/2013/03/03/the-transition-t... - note the detail that people on "work programme" placements are not counted as unemployed. See https://welfaretales.wordpress.com/category/work-program-2/
The "sharing economy" is another factor in this. If someone signs up for e.g. Taskrabbit and does a few hours a week, they're then "self-employed" and no longer count against the unemployment statistics, they can claim tax credit (especially if they have a child, you get quite a lot) and housing benefit to cover for the fact that the 'work' pays nowhere near enough to live on.
Are you implying that this is having a significant effect on the US unemployment statistics? And that, in the context of the article and discussion, there is no economic recovery?
Every time unemployment statistics are brought up, anywhere on the internet, these edge cases get presented. Read how the BLS measures are calculated. Yes, the unemployment rate is based off of surveys and statistical inference, so isn't a 100% accurate representation of the real world. Yes, the dynamics of the labor force change over time, and it isn't necessarily stable over decades or centuries.
But the U6 measure, which includes "discouraged workers" who are no longer looking for work, as well as those forced to work part-time for "economic reasons" has fallen from a peak of 16.7% in 2010 to 11.3% today. That sort of move just isn't explained by people signing up for TaskRabbit, or anything like it.
I think part of the reason people deny a recovery is occurring is that they conflate it with boom times. Recovery doesn't mean everything is running at capacity; it doesn't even mean we've recovered yet. It means the trend is up. Looking back to 2009, that's hard to deny.
Which is very real in my perception.
The best data is from the RSA https://www.thersa.org/discover/publications-and-articles/re...
Back to these low interest rates. At this point in the recovery, I am just seeing rich people playing with essentially free money--taking some big risks, but I don't see it trickling down to the middle class and poor--in most cases.
I see this essentially free money being funneled into the stock market, because there's no where else to put the money, except real estate, and speculative VC investments. That's fine and dandy, but the poor and middle class are having a hell of a time getting loans. They are essentially locked out of the party? Yes, the middle class is greatful their Company retirement plan is soaring, but it will drop.
Many of us(poor, middle class) speculate in CD's, and in my case I am getting .1 percent per year-- on my meager account. I can't afford to speculate. I don't think I am alone. I counted on the interest I used to make. It's gone. I now pay the bank more in fees than I get in interest. In my case, I have a negative rate of return on my money.
My point is I don't see this essentially free money the rich are getting trickling down, with the exception of the tech industry. You guys seem to be doing great, and you guys deserve it. And yes, their are hot spots like the Bay Area where houses are way up in value, but so are rents. Rents have gone up so high long term residents are being forced to relocate.
What I am trying to convey--poorly--is I don't think the economy is doing that great. Food stamp usage is at an all time high? The unemployment number is beyond skewed because they stop including you in that figure once that check stops--I believe? Student loans are at an all time high. Small and medium sized business are having a hard time securing those low interest loans. I see so many Homeless. I my county, section 8 housing is closed, and there's a three year waiting list. I honestly don't see the variety of jobs like I did before the ression. People are so desperate for work they are buying newer(2008) four door cars in order to work for Uber. Non profits are closing--some deserve to close, but some of the better ones are not getting the donations like in years past. I can go on, but getting tired.
My major point is so many of us are losing net value in this low interest rate economy. The renters who rely of cd's to hold their money are hurting. I don't blame anyone politically. I'm glad medically uninsurable home owners don't need to risk losing their home in a medical judgement attachment thanks to Obama, and a Supreme Court justice.(forget his name, but he is a kind man, and a Rebublican!)
I see another ression coming real quick. I hope families stick together, and pool their resources--and don't blame the wrong people when the chit hits. I'm usually 180 degrees wrong when it come to money--so I'll dummy up. Sorry--just venting!
But what does irk me a bit is:
"My major point is so many of us are losing net value in this low interest rate economy."
This is a weak form of Bastiat's broken window fallacy in action. You see the money you are losing, but don't consider what higher rates mean for others, like less discretionary money in the economy because more income is going towards car loans, student loans, credit cards, mortgages. There could even be less entrepreneurship occurring due to the higher hurdle rate. Have you included this in your net value calculation?
You don't "deserve" to earn more interest on your CD any more than I "deserve" to pay less interest on my mortgage.
My assumption is that they haven't worked twice as hard. And as the UK economy isn't really picking up, they clearly haven't added double the value to it.
The only problem that may have caused in the UK is making the ISA account look less attractive, which could impact the rate people save. (the money you put on your ISA is 'locked away', which mean you are less likely to spend it)
Based on the rule of 72 (https://en.wikipedia.org/wiki/Rule_of_72) that sounds about right for that time frame. 72 divided by 8 years is 9% per year.
Keep in mind that wealth is probably mostly on paper and could disappear just as easily.
We currently have bubbles in education, healthcare, housing, and many people would argue the tech industry as well. Which time bomb goes off first?
Interest rates are set in agreement between borrowers and lenders, and hence are always artificial.
As far as optimality, the "best" rate is one as low as possible without causing inflation.