Economist gives state of economy address

Mark Reccek , Reporter,
Posted: 5:52 AM EDT Jun 09, 2016


Economist Kamran Afshar, PhD, of Kamran Afshar Associates, Inc. (KAA), examined the state of the economy, both local and national, during a presentation Wednesday afternoon at the LC Bar Association in Allentown.

According to Afshar, Lehigh Valley businesses during the monthly of April saw the largest drop in the index of future purchases.

“Businesses significantly cut back on that one thing,” he said, adding the political election cycle leads to uncertainty. “Still a good number of them are expanding.”

In terms of hiring the last six months, there has been a slight drop. The number currently is about 12 percent, compared to 10 percent before the Great Recession.

“However, the number of business who have actually increased the numbers of employees is significantly higher than those that have reduced the number of employees they have,” he said.

Afshar also provided a forecast for hiring in the Lehigh Valley.

“Our current forecast for the balance of the summer is we are not going to see significant increases in employment,” he said. “By the end of the summer we are going to start to see a turnaround but we are at this point in a relatively flat area for net hiring.”

The causes, he said, are due to businesses beginning to become concerned with events that are occurring, and as businesses hire more employees they run out of the type of employees they seek to hire at the prices they are willing to pay.

Unemployment in the Lehigh Valley has decreased, Afshar also said, noting about 20,000 individuals are currently searching for employment.

“However, when you look at the initial unemployment claims, it has dropped to the level that is historically associated with a tight labor market,” he said. “If this trend continues, and I expect it to continue through the summer months at least, this would be the fourth time in the last 30 years that the Lehigh Valley has gone into a tight labor market.”

Unemployment will continue because individuals out of the employment market are not equipped to handle changes associated with certain jobs.

“At least for the next seven months you are going to see a tight labor market,” Afshar added.

Nationally, according to Afshar, the Gross Domestic Product, which crashed during the Great Recession, did rebound but then leveled off between 2 and 4 percent.

“The importance of that is we need to get the economy to about 3 and 3.5 percent,” he said. “Beyond that growth would be very slow.”

Afshar noted the economy typically “gets hot” when growth moves beyond 2.5 percent.

“Last quarter growth was really bad,” he said. “We are hovering around 2 percent growth for the year.”

The May results indicated only 38,000 new employees added to the job market

Almost 200,000 new jobs have been created every month. Since the start of the economic recovery, 80 percent of all the jobs created are full-time jobs, not part-time.

“It is a significant growth,” he said. “Employment is increasing, and that is real.”

Those unemployed for 27 or more weeks, at one point, numbered 7 million. That number has dropped to about 2 million.

Afshar also said many jobs that have left will never return “not because they have gone to China, but because they have gone away.”

“Technology has taken a lot of those [jobs],” he said. “Technology changes and the pace of that change is increasing and has become more rapid.”

Adjusted for inflation, real wages increased over the past 38 years from only $41,000 to $42,500, which amounts to 4.4 percent.

“Real wages have not increased,” he said.

The causes, he said, are due to the automation of manufacturing, which require fewer employees to do a job.

to read more go to: