The employment report appears to confirm that the economy has slipped into a stagnation scenario as both payroll and the household survey reported that employment fell. The drop in employment stemmed largely from the layoffs of census workers as private sector employment rose some 71,000 as compared to 31,000 last month.
Compared to the historic norm employment employment gains this cycle has been extremely weak, but it is stronger than in the jobless recoveries of the 1990s and 2000s.
Hours worked increased 0.4%, but that largely just offset last months decline of 0.3%. The
compound growth three month growth rate slipped to 3.0% from a 3.5% growth rate last month.
Average hourly earnings growth continued to slow as the year over year gain was 1.75%. Because hours worked are expanding the weekly wage gain rose to 3.0%. With zero inflation in the first half of the year this means that real weekly wages are rising moderately.
This gain in real weekly earnings has been reflected in the single most important determinant of real consumer spending, real disposable income excluding transfers. The year over year change in this measure just turned positive for the first time this cycle.
Spencer, a question re: chart 2. How can the 90s end on a high and then the 00s start on a low?
Imagine the ’00s beginning where the ’90s leave off. The chart indexes the beginning of each decade at 100 and overlays them, for ease of comparison. Standard data presentation stuff.
The data on hours worked, hourly and weekly earning make an important point. Hourly earnings rose 0.2% in July. Weekly earnings rose 0.5%. It’s the 0.1 hour increase in the workweek that accounts for the extra 0.3% of weekly earnings. An increase in hours really boosts take-home pay. An increase in employment adds 34.1 hours (on average in July) for every new hire. That’s why consumer demand is so sensitive to employment – one reason, anyhow. Employment is sensitive to hours (yay!) and orders (sigh).
Corev, does KHarris answer satisfy you?
See right under the title it says each series is set at 100 at the end of the recession.
So each chart shows the cumulative job growth over the course of the cycle.
Note that the average of the earlier recessions also ends at a high level.
I’m still confused by the graph. Without the start stop dates, the data appears to show some empty time. What I’m trying to decipher is how does one decade 120 months = ~90 months of data displayed? What am I missing here? Is it the labels that imply decades, but the alignment is different from that? Or is it coincidental that the 90s business cycle overlapped the 00s?
Dunno. Just wonderin.
What you are missing is that it use to be normal for an expansion to last abbout 3 years. But the last two cycles — the 1990s & 2000s — lasted about a full decade.
It is the chage in the cycle under the great moderation. the trade off is weaker recoveries, but longer cycles.
Not to be a party pooper, but 3% increase in hours worked with only a 1.75% in hourly wage, that’s not going to cut it for long. The black line is still heading south.
Is the aggregate population total of gain in weekly earnings for those who are working enough to offset the aggregate total loss of income no longer circulating as “consumption” d to those unemployed or under employed? Or is it at least making a dent? If it’s not, then the economy really is not gaining except for those in the money from money sector.
For those of you who are interested here is my in depth analysis of the employment report