EMPLOYMENT SITUATION
The employment report was the strongest this cycle as total payroll employment expanded some 216,000. This consisted of a 230,000 gain in private payrolls and a 14,000 drop in government jobs as state and local governments are still shedding jobs. Moreover, the household survey reported a 291,000 gain in employment. The last two months private employment gains have been the strongest this cycle, exceeding the 229,000 gain in April 2010. Last months gains now appears to be the start of a new stronger trend rather than
just an offset to the weak numbers in January.
The unemployment rate fell 0.1 percentage points to 8.8%. Earlier this year it looked like signs of a stronger economy was showing up almost everywhere but the employment data.
Now the employment data is joining the other data pointing to a stronger economy. We need to remember that employment is considered to be a lagging indicator.
The improvement was also reflected in stronger hours worked as the index of aggregate hours worked rose 0.6% — the largest monthly gain this cycle.
But average hourly earnings were unchanged at $22.87 and the annual growth rate continues to slow.
The combination of expanding hours and very weak wage gains generated an increase in average weekly earnings. But the year over year increase in average weekly earnings is only
2.87% this month versus 2.98% in February. With weekly earnings only growing at under a 3% rate it is hard to see how firms can pass higher commodity prices through to consumers.
The inflation hawks seem to be ignoring the point that higher prices or inflation is most likely to generate weak consumption, not sustained higher inflation. Managers and analysts appear to be far too optimistic about firms ability to raise prices.
In other labor related news UW-Stevens Point just became the 4th WI college campus to vote for union representation after Governor Walker’s illegal union busting attempt.
http://www.bloomberg.com/news/2011-03-31/wisconsin-professors-unionize-defy-walker-s-law-on-collective-bargaining.html
So the most obvious effect of Walker and the Koch brother’s efforts are an actual increase in successful union organization efforts. Well played Governor Walker!
“The combination of expanding hours and very weak wage gains generated an increase in average weekly earnings. But the year over year increase in average weekly earnings is only
2.87% this month versus 2.98% in February. With weekly earnings only growing at under a 3% rate it is hard to see how firms can pass higher commodity prices through to consumers.”
Spencer – I totally agree with your point. But I have another one: with weekly earnings only growing at under a 3% rate, how are consumers supposed to increase saving AND spending? Consumer confidence is dropping again amid higher gas prices, the euphoria of asset price gains wearing very thin, and weak employment prospects (the employment to population ratio remains submerged below what I would deem to be “equilibrium” based on demographic trends).
I highlighted a bit ago using the Flow of Funds data that it is the falling of excess household saving that is driving consumption trends right now. I imagine that will not continue for much longer, since disposable income is growing at a 2.7% annual rate. That means, given the weak wage and real income gains, consumption will likely slow.
I think that Robert Reich describes the current economic themes now quite well.
Thanks for a great post! Rebecca
Rebecca:
Tide 32 washes $5.97 last june and ~$8.00 now (finally had to buy a bottle). If this is an indicator of prices increasing faster than wages, it appears we are in trouble.
Why employment to population ratio?
I can still recall driving down 41 and listening to UK games while Rupp was coach….but this time…