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, Apr 4, 2015 • By IRWIN M. STELZER
The economy might, but only might, be slowing. In March we added only 126,000 jobs, the lowest increase since December 2013, barely enough to absorb new entrants into the workforce. Almost all measures of the health of the labor market -- the unemployment rate, the number of workers jobless for more than 27 weeks, the number involuntarily working short hours or too discouraged to continue looking for a job -- remain more or less stuck at present levels.
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%.
8:35 AM, Sep 26, 2014 • By DANIEL HALPER
A new chart from the minority side of the Senate Budget Committee shows a startling fact: Almost 1 in 4 Americans between the ages of 25-54 (or prime working years) are not working.
Here's a chart showing those in that age group currently employed (95.6 million) and those who aren't (28.9 million):
9:42 AM, Aug 21, 2014 • By GEOFFREY NORMAN
First time claims were expected to be come in at 303,000. The actual number was 298,000. As Shobhana Chandra of Bloomberg reports:
8:32 AM, May 2, 2014 • By DANIEL HALPER
The latest jobs numbers from the Bureau of Labor Statistics:
Total nonfarm payroll employment rose by 288,000, and the unemployment rate fell by 0.4 percentage point to 6.3 percent in April, the U.S. Bureau of Labor Statistics reported today. Employment gains were widespread, led by job growth in professional and business services, retail trade, food services and drinking places, and construction.
Household Survey Data
12:17 PM, Mar 4, 2014 • By JERYL BIER
Here's a rather harsh assessment of the last four years under the Obama administration's economic policies:
The corrupting effects of Obamacare.Feb 24, 2014, Vol. 19, No. 23 • By JAY COST
On February 4 the Congressional Budget Office dropped a bombshell. Analysts there found that Obamacare’s structure will create an enormous implicit tax on work, such that people on the lower end of the economic scale will have an incentive to quit their jobs or scale back to part time to maximize their premium subsidies. In an earlier study, CBO had estimated that this disincentive to work would destroy the equivalent of less than a million full-time jobs. Now, it projects that an equivalent of more than 2 million jobs will be lost as people voluntarily leave the workforce.
10:26 AM, Sep 2, 2013 • By GEOFFREY NORMAN
The celebration of work and the working man and woman feels a little forced this year. Union have, as Kevin Bogardus of The Hill reports:
'More people retiring early, going on disability, turning to welfare, and giving up looking for work altogether.'9:01 AM, Sep 2, 2013 • By DANIEL HALPER
Alabama senator Jeff Sessions, a Republican, is marking Labor Day with a statement lamenting the decline in America’s workforce and the strident push toward passing an immigration bill.
8:31 AM, Jul 5, 2013 • By DANIEL HALPER
The latest jobs numbers from the the U.S. Bureau of Labor Statistics:
THE EMPLOYMENT SITUATION -- JUNE 2013
Total nonfarm payroll employment increased by 195,000 in June, and the unemployment rate was unchanged at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in leisure and hospitality, professional and business services, retail trade, health care, and financial activities.
Household Survey Data
8:31 AM, Jun 7, 2013 • By DANIEL HALPER
The unemployment rate ticked up, according to new numbers from the Bureau of Labor Statistics:
Total nonfarm payroll employment increased by 175,000 in May, and the unemployment rate was essentially unchanged at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and business services, food services and drinking places, and retail trade.
Household Survey Data
Both the number of unemployed persons, at 11.8 million, and the unemployment rate, at 7.6 percent, were essentially unchanged in May. (See table A-1.)
8:45 AM, May 3, 2013 • By GEOFFREY NORMAN
Today's big number is non-farm payrolls. And, thus, the unemployment rate for the previous month. The economists surveyed by Reuters called for 145,000 jobs and an unemployment rate at 7.6 percent.
The numbers came in at 165,000 new jobs and an unemployment rate of 7.5 percent. Pretty close.