7:18 AM, May 9, 2015 • By IRWIN M. STELZER
Prices matter. They are the economists’ canary in the coal mine, an indicator of what is to come. Not necessarily as grim an indicator as when we have here a dead canary, but a pointer that cannot be ignored. When oil prices plummeted, analysts paid attention, hunting for causes and effects. Wages are the price of labor. So when the government reported late last week that average hourly earnings rose in April by a puny 0.1%, or three cents an hour, the failure of that price to rise suggested that still another price, the price of money, better known as interest rates, might be kept at close to zero by the Federal Reserve Board’s monetary policy committee. “The low rate of wage growth is, to me, another sign that the Fed’s job is not yet done,” Yellen revealed last year.
The economy did succeed in adding 223,000 jobs in April, after a meager 85,000 in March (revised down from the original estimate of 126,000). The headline unemployment rate remains at 5.4%; when workers too discouraged to continue hunting for work, and those involuntarily working part-time are included, the rate jumps to 10.8%, while the labor force participation rate remains virtually unchanged at a low 62.8%.
So the wage-rate canary is alive, but not chirping a happy tune as it looks ahead. If there were a bright light at the end of the tunnel, the price signal -- average hourly earnings -- would be rising at a healthy pace. The relatively stagnant price of labor is signaling that the rate of job creation is inadequate to absorb enough of the jobless workers to put upward pressure on wages. In terms more familiar to left-leaning economists, a large “reserve army of the unemployed” is preventing workers from pressuring employers to raise wages. Just as excess supplies helped drive down the price of oil, and surpluses have driven down the average of global commodity prices by 34% in the past twelve months to 2009 levels, so an excess supply of workers is keeping the price of labor from rising.
One source of that excess supply is rather obvious. The decision of the Chinese regime to enter the world economy so as to end generations of rampant poverty added over one billion workers to the world’s labor supply. Increase supply and, other things being equal, drive down price, as true in the labor market as it is in most other commodity and finished goods markets. Surpluses in those markets -- inventories of durable goods in the US are at their highest level since the government began publishing those data in 1992 -- are a main reason that inflation remains virtually non-existent despite easy monetary policy.
Then there is the problem of productivity. In the long run, wages closely follow productivity. Workers who can produce more in an hour, can earn more in an hour. But so far this year worker productivity has declined in America. The hourly output of goods and services of nonfarm workers fell 1.9% in the first quarter of this year, the second consecutive quarter in which productivity has fallen. That, notes the Wall Street Journal, “has happened only three times in the past quarter-century.” The economy is taking on more and more workers -- some 2.8 million more Americans are in work than at this time last year -- but businesses are not investing in the equipment, factories, software and other tools workers need to become more productive. If more output is needed, better to hire workers at wages that are not rising than to build plant: workers can be laid off if demand falls, investment in idle factories can’t easily be erased from the balance sheet. “Given that over the long run real wage gains and real productivity growth tend to be correlated, this does not bode well for the inflation-adjusted pay-checks of American workers,” Guy Berger, U.S. economist at RBS Securities, told the Journal.
Then there is the not-so-small matter of education. College graduates earn about $1 million more over their lifetimes than workers with only high school degrees. And workers without high school degrees who once held relatively well-paying jobs, with prospects of rising wages, are even more hard-pressed. The Brookings Institution reports that median earnings (the level in the middle of the wage distribution) of working men aged 30 to 45 without a high school diploma, fell in inflation-adjusted terms by 20% between 1990 and 2013, to $25,500 from $31,900 (in 2013 dollars). For similarly uneducated women the decline was not as steep, but still a significant 12%. Factory jobs for less educated workers have declined, and lower-paying ones in food service, cleaning, grounds-keeping and the like have doubled as a portion of all jobs held by this group. That structural change in the economy is unlikely to be reversed.
12:01 AM, Mar 7, 2015 • By IRWIN M. STELZER
Sometimes -- not often, but sometimes -- anecdote is more revealing than data. Especially when the data are subject to major revisions, which is the case with most monthly economic data. This is one of those times. Last week’s jobs report -- 295,00 new nonfarm jobs in February -- was a bit more robust than most experts had expected, and the unemployment rate ticked down from 5.7% to 5.5%.
10:10 AM, Nov 7, 2014 • By GEOFFREY NORMAN
The monthly BLS report on unemployment comes in under expectations which were for some 235,000 news jobs. So the 214,000 is a downside miss. However, the new benchmark for “good, not great” seems to be a monthly increase in of 200,000. And the economy has hit that number for nine consecutive months.
9:39 AM, Oct 1, 2014 • By GEOFFREY NORMAN
Coming in ahead of the unemployment figure for September, which will be released on Friday, and tomorrow’s weekly first-time-claims number, the ADP jobs report might be some sort of harbinger.
10:00 AM, May 21, 2014 • By MARK HEMINGWAY
A new poll suggests that finding employment, particularly for the long-term unemployed, continues to be a struggle for Americans. The poll, conducted by Harris Poll on behalf of Express Employment Professionals, asked questions of 1,500 unemployed adult Americans last month.
9:13 AM, May 2, 2014 • By GEOFFREY NORMAN
Non-farm payrolls beat expectations. Quite handsomely. As Michelle Jamrisko of Bloomberg reports:
Employers boosted payrolls in April by the most in two years and the jobless rate plunged to 6.3 percent as companies grew confident the U.S. economy is emerging from a first-quarter slowdown.
4:31 PM, Mar 28, 2014 • By GEOFFREY NORMAN
Ben Casselman at 538, on unemployment and underemployment, starting from this point.
10:30 AM, Mar 21, 2014 • By GEOFFREY NORMAN
Long-term unemployment, in some cases, does not even show up in the jobless figures released monthly by the Labor Department and eagerly anticipated by the political spinners standing by to mold them into partisan shape. Many of those whose unemployment has been prolonged simply give up; something that is confirmed by a recent study from a former Obama administration economic advisor. As Ben Casselman of 538 writes:
Conservatives and the unemployed.Mar 3, 2014, Vol. 19, No. 24 • By IRWIN M. STELZER
Millions of Americans, glutted with benefits that until now have seemed likely to be renewed and renewed again, have suddenly become devoid of ambition, shed the work ethic, and taken to the couch and the TV remote. Or found a back pain or emotional problem that entitles them to the even higher benefits designed to ameliorate the plight of truly disabled workers.
11:00 AM, Feb 20, 2014 • By JERYL BIER
A recently released Department of Agriculture (USDA) report on the "Food Assistance Landscape" for the fiscal year 2013 shows that for the second year in a row, participation in the federal government's SNAP (food stamps)
8:31 AM, Jan 10, 2014 • By DANIEL HALPER
The latest jobs numbers from the U.S. Bureau of Labor Statistics:
The unemployment rate declined from 7.0 percent to 6.7 percent in December, while total nonfarm payroll employment edged up (+74,000), the U.S. Bureau of Labor Statistics reported today. Employment rose in retail trade and wholesale trade but was down in information. …
Household Survey Data
11:44 AM, Jan 7, 2014 • By MICHAEL WARREN
House speaker John Boehner released a statement Tuesday concerning "'emergency' unemployment insurance" (Boehner's quotation marks) and criticizing President Obama for not offering a plan to extend unemployment insurance that would include provisions to "put people back to work." Here's the statement: