The latest from the Bureau of Labor Statistics:
Nonfarm payroll employment increased by 132,000 in June, and the unemployment rate was unchanged at 4.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Employment rose in several service-providing industries, while manufacturing employment continued to decline. Average hourly earnings rose by 6 cents, or 0.3 percent, over the month.
The Household Survey actually reports an employment increase equal to 197,000, which increased the employment to population ratio from 63% to 63.1% – which kept the unemployment rate steady even as the labor force participation rate edged up.
Dean Baker reports a few details:
The June jobs numbers came in somewhat better than expected largely due to the government adding 40,000 jobs. The health care sector accounted for 42,300 of the 92,000 jobs created by the private sector. Over the last three months the health care sector has accounted for 131,000 of the 345,000 jobs created by the private sector or 38 percent. The better than expected job growth implies another quarter of weak productivity growth. With hours growing at a 2.3 percent annual rate, productivity for the quarter will be approximately 1.0 percent if GDP comes in near the consensus forecast. That means that we will have had three full years with average productivity growth of less than 1.5 percent. This has to raise serious questions about whether the post-1995 productivity upturn has come to an end.
CalculatedRisk looks at employment growth since President Bush took office as well as employment in the residential construction and retail employment sectors.
Update: AP covers the latest from the BLS and wants you to believe that wages are rising:
The latest picture of the nation’s employment climate, released by the Labor Department on Friday, also showed that workers saw solid gains in their wages last month … Workers saw modest wage gains in June. Average hourly earning rose to $17.38, a 0.3 percent increase from May. That matched the rise anticipated by economists. Over the last 12 months, wages grew by 3.9 percent.
So were these “solid gains” or “modest wage gains”? A 3.9 percent increase over a year might sound nice until one realizes that AP is talking about nominal increases. Our graph shows average hourly earnings of production workers in constant dollar (1982) terms, that is, in real terms. Notice something. In May 2007, the real wage was $8.26 – which was the same as the real wage as of September 2002. Over this period, real wages have varied. During periods when inflation exceeded nominal wages increases, the reported real wage declined. For other periods, the nominal wage increase actually did exceed inflation so the reported real wage increased. So with real wages so a lot of variability but no particular trend, why is AP trying to convince us workers are better off. Did they outsource their reporting to Lawrence Kudlow?
Update II: Greg Ip cites Janet Yellen and a few other smart folks suggesting that the labor market is not all that tight:
But there are signs the labor market isn’t as tight as the low unemployment rate suggests. One reason is the absence of a notable acceleration in wage growth. Average hourly earnings rose 0.3% in June from May and were up 3.9% from a year earlier, in line with the rate of growth for the past year. The more comprehensive employment cost index grew 3.5% from the previous year in the first quarter, in the range of the past several years. Broader measures of compensation accelerated in the first quarter, but that may reflect the vagaries of employee stock options and one-time bonuses … Federal Reserve Bank of San Francisco President Janet Yellen, in a speech delivered via video conference to the Risk Management Institute of Singapore early Friday local time, said, it’s possible “labor markets may not actually be particularly tight,” citing the restrained growth in employment costs … The low unemployment rate reflects in part a recent drop in the “participation rate” – the share of working-age people either on the job or looking for work – from 66.4% in December to 66% in May. It edged back to 66.1% in June. Much of the drop in the participation rate has been among teenagers; contrary to the Fed’s expectation, the participation rate of older workers has actually risen. Jared Bernstein, senior economist at the Economic Policy Institute, a Washington think tank, noted the participation rate has fallen especially sharply for young people, blacks and Hispanics, groups who are “especially sensitive to the economy’s ups and downs.” If those missing workers were reported as unemployed, the jobless rate would be 5% instead of 4.5%, he said in a report.
We should note that the discussion of labor compensation was in terms of nominal growth with real growth being near zero. We should also that the employment-population ratio 64.4% at the end of 2006 and is only 63.1% now. Finally, we should give hat tips to Mark Thoma and Brad DeLong.
Update III: Go figure – Lawrence Kudlow thinks the labor market is great:
Year-to-year wages for non-management workers increased 3.9 percent. Comparing that with the 2.3 percent increase in the headline inflation personal consumer deflator (for May, the latest month) leaves about 1.5 percent improvement in real wages. The unemployment rate remains at a historically low 4.5 percent.
I guess Kudlow does not realize that the employment to population ratio has declined over the past six months – but that labor force participation rate has also declined. Incidentally, could someone tell this National Review nitwit that the unemployment rate has been much lower than 4.5%? Heck – it was below 4% towards the end of the Clinton years. And that wasn’t even near the historical low.
Sure real wages in May 2007 were higher than that really low $8.17 (1982$) figure for May 2006. But real wages in May 2007 were no higher than they were as of September 2002. Leave it Kudlow the Klown to confuse what is noise with what is NOT an upward trend.
Update IV: James Pethokoukis outdoes even Kudlow for dumbest comment on wages:
Real wages for workers – not managers – increased by 3.9 percent, year over year. Deflate by the core May inflation rate of 2.3 percent – the latest numbers available – and you get real wage growth of 1.6 percent.
Real wage growth minus inflation equals real wage growth. James? That is really stupid. No, nominal wages grew by 3.9%. The rest seems to be a cut and paste from Kudlow’s Korner Krap. Both of you – consumer prices from May to May grew by over 2.6%. I checked the BLS data for the period from July 1979 to July 1980. Nominal wages during the year rose by 7.86% but consumer prices rose by 13.13% over the same period. But here’s the rub. Consumer prices did not change from June 1980 to July 1980. So this Kudlow-Pethokoukis calculus would have suggested a large real wage increase for a period where real wages fell. Brilliant!