June jobs report: great headline, but once again where are the wages?!?
June jobs report: great headline, but once again where are the wages?!?
- +222,000 jobs added
- U3 unemployment rate rose +0.1% from 4.3% to 4.4%
- U6 underemployment rate rose +0.2% from 8.4% to 8.6%
Here are the headlines on wages and the chronic heightened underemployment:
Wages and participation rates
- Not in Labor Force, but Want a Job Now: down -130,000 from 5.561 million to 5.431 million
- Part time for economic reasons: up +107,000 from 5.219 million to 5.326 million
- Employment/population ratio ages 25-54: up +0.1% from 78.4% to 78.5%
- Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 from $21.99, to $22.03, up +2.3% YoY. (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
Holding Trump accountable on manufacturing and mining jobs
Trump specifically campaigned on bringing back manufacturing and mining jobs. Is he keeping this promise?
- Manufacturing jobs rose by +1,000 for an average of +2000 vs. the last severn years of Obama’s presidency in which an average of 10,300 manufacturing jobs were added each month.
- Coal mining jobs were unchanged for an average of +200 vs. the last severn years of Obama’s presidency in which an average of -300 jobs were lost each month
April was revised upward by +33,000. May was also revised upward by +14,000, for a net change of +47,000.
The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mainly positive.
- the average manufacturing workweek rose +9.1 hour from 40.7 hours to 40.8 hours. This is one of the 10 components of the LEI.
- construction jobs increased by +16,000. YoY construction jobs are up +206,000.
- temporary jobs increased by +13,400.
- the number of people unemployed for 5 weeks or less increased by +151,000 from 2,154,000 to 2,305,000. The post-recession low was set 18 months ago at 2,095,000.
Other important coincident indicators help us paint a more complete picture of the present:
- Overtime was unchanged at 3.3 hours.
- Professional and business employment (generally higher- paying jobs) increased by +35,000 and is up +624,000 YoY.
- the index of aggregate hours worked in the economy rose by 0.5 from 106.9 to 107.4
- the index of aggregate payrolls rose by +0.8 from 134.0 to 134.8.
Other news included:
- the alternate jobs number contained in the more volatile household survey increased by +190,000 jobs. This represents an increase of 1,560,000 jobs YoY vs. 2,238,000 in the establishment survey.
- Government jobs rose by +35,000 .
- the overall employment to population ratio for all ages 16 and up rose +0.1% from 60.0% to 60.1 m/m and is up +0.5% YoY.
- The labor force participation rate rose +0.1% m/m and is up +0.1% YoY from 62.7% to 62.8%.
The best thing about this report was the headline number of jobs added, plus the big positive revisions to April and May, which brought the average of the last three months to +191,000. Most of the leading internals were also positive, suggesting the positive headline news should continue over the next six months. Those not in the labor force but who want a job now also declined to a post-recession low (but still elevated by nearly 1 million above the late 1990s boom.)
While the unemployment and underemployment rates went up, this was balanced by the increase in labor force participation rate.
One weak spot was that involuntary part-time employment increased slightly. Also, politically, Trump has so far actually *underperformed* Obama in the net for manufacturing and coal mining jobs.
But the one big negative — broken record here — was wages, which have now grown only +2.3% YoY for nonsupervisory workers. So while this a a very good late cycle report, my fears are increasing about how bad it will be for workers when the next recession does hit.
Are changes like 107K out of a category population of >5M reliable?
Considering Q4 2015-Q2 2016 was a “micro-recession”(a Friedman term for when expansions don’t “end” but stall out for a period of time), there may be a lag. I always got it as production=drop in unemployment=rise in wage, generally 12-18 months later from the burst in productino. Notice the burst in production during the 3rd quarter of 2013 and the path it took the next 18 months by March of 2015. The current “recovery” started in the 3rd quarter of 2016 and should net results by this fall to next spring. There is also the effect of the Arabs exporting to much oil into the US earlier in the year and other “inflation” factors that take off a few tenths, but that will pass.
I also think the micro-recession did not help Clinton at all during the election with such soft support from the single male/female demographic. The recovery had started, but the labor “slowdown” was obviously a leftover effect.
This was caused by the oil bust. It did have some very slight reach across the US. Now it is being replaced as Rage said in another thread with a boost in non-fixed residential capex related to technology production. Has the new bubble arrived to finish the maturation process in the cycle? Based on demographics adjustment, it looks like the economy in June of 1996 is a good benchmark for the economy in June of 2017. Very similar echo’s.
As you write, the labor participation rates are still low, underemployment is too high, and wages are still not rising as one would expect with an unemployment rate of 4.4percent.
Add to those:
1. Total Household Debt is now higher than it was in Q2 2008.
2. New automobile inventories are very high in spite of generous terms for leasing and longer term auto loans. (Layoffs would further dampen this sad “RECOVERY”.)
3. Gasoline usage was expected to rise much higher than it has this summer. (What is keeping Americans at home instead of vacationing?)
But what would those statistics look like if the Federal Reserve had returned interest rates to what they were in 2007 when the unemployment rate was about 4.7percent?
As I have stated before, I believe that we have been repeating the Great Depression. Increasing consumer debt led to increasing consumption and thus increasing production until consumer debt maxed out, then a financial crisis as excessive debt and fraud were exposed. (That cycle depended on the new installment loans and ran from about 1920 to 1929)
See: “Credit Expansion, 1920 to 1929, and its Lessons” November 1930 by Charles E. Persons
Our cycle depended on the Housing Bubble which pushed home values higher and higher which enabled borrowers to take more and more equity out of their homes. That money was spent into the economy increasing consumption and thus production. That ended when borrower defaults increased on loans in about 2006. Again excessive debt and fraud were exposed. Investment banks were dealing with massive losses by mid 2007 and were bailed out late in 2008.
There was a sad “RECOVERY” in the mid 1930s. That inspired the federal government to raise taxes and remove some stimulus, which brought on the 1937 recession. Actually the Great Depression had never ended, it had been masked by federal government spending. And when that government spending was reduced, growth disappeared.
We may be repeating that with the Federal Reserve raising interest rates. (But the really have no choice.)
I believe that your fears about how bad it will be for American workers when the next recession hits are well founded.
I’ve long believed that inflation expectations plays a major role in the wage setting process and wrote about that here in Sept. 2012.
This equation is still calling for weak wage growth.
However, I have started to think that demographic may be holding down average hourly earnings recently. An individuals wages generally rise with age, as a 50 year old is paid much more than a 25 year old. In recent years we are seeing baby boomers retiring and being replaced in the workforce with younger workers. Consequently, the average age of the labor force is contracting. In the 1960s, 1970s and early 1980’s baby boomers entering the labor force tended to hold average average hourly earnings down. Since 2000 the maturing of the baby boomers tended to put upward pressure on the average age of the workforce and add upward pressure on average hourly earnings. Now, I suspect the retirement of the baby boomers is causing the average age of the workforce do fall and dampening upward pressure on reported average hourly earnings.
I’ve just recently started to think about this and have not yet collected the data to take a hard look at it.
I know one older guy still working at a good wage. That would be an interesting study if you can do it.
Participation rate by age
That should be over 65, not 75