Some really good news this morning, but a note to hold your horses on the celebration of at least one aspect of that news.
Initial jobless claims, which I’ve called the single most positive data point in the entire economy, posted nearly a 50-year low at 210,000. On a population- or labor force-adjusted basis, it is an all time low.
This, by the way, bodes well for a another decrease in the unemployment rate in the next several months, possibly as early as in next week’s jobs report, as initial jobless claims lead the unemployment rate typically with a short 1-3 month lag.
Bottom line: people may not have great jobs, but the jobs they have are more secure now than they have been at any point since the 1960s. That’s great news.
There was good news in personal income and outlays as well, with a strong +0.5% increase in income, and a pop in the savings rate from 2.5% to 3.2%.
BUT … the big positive news looks like a one-time jump based on the payment of bonuses, and also the decline in tax withholding in January due to the tax law changes passed by Congress.
Here’s the important note from the Commerce Department:
So we had a big $30 pop in savings due to the payment of annual bonuses, that is of a piece with the big +0.8% pop in supervisory wages we saw in January’s employment report. There is good reason to believe that little if any of this found its way down to the plebes, also based on January’s employment report.
Also noteworthy is that monthly tax withholding, based on the Commerce Department’s $115 Billion annual estimate, boils down to just shy of $10 Billion per month, or about 5% of current withholding. That will continue, so the YoY comparisons will continue to be good, but this is a one-time pop on a m/m basis. Keep in mind that other provisions of the tax changes, especially real estate and state tax provisions, may offset most of this improvement, but won’t be shown in the personal income and outlays reports.
So while line workers’ jobs may be very safe, there may actually not be significant net improvement in their take-home pay. Great overall news, but unless you get bonuses as a manager, you may withhold popping the cork on the champagne.
“There is good reason to believe that little if any of this found its way down to the plebes, also based on January’s employment report.”
Could not agree more.
“Initial jobless claims, which I’ve called the single most positive data point in the entire economy, posted nearly a 50-year low at 210,000. On a population- or labor force-adjusted basis, it is an all time low.”
But I see no good news here.
In a normal economy employees look for higher wages. When they find them, they quit their old job. That is they quit unless their employer matches or comes close to the wage of the new job. People sometimes choose to avoid the stress of a new job if the boss feeds their ego and their wallet. That was common before all these free trade treaties.
An all time low of quitting and firing is not a positive. It is a symptom of a problem.
Part of the problem being that good jobs are very difficult to come by.
And part of the problem being that employers are not willing to offer large enough wages to steal employers from other companies. They place ads and sort thru the applicants, hoping to find someone qualified and desperate enough to take less pay. HR departments are clueless about job requirements, they look for key words in a job description. But they do understand pay scales.
So wages have not gone up the way they should have.
JimH, “In a normal economy employees look for higher wages. When they find them, they quit their old job. That is they quit unless their employer matches or comes close to the wage of the new job.”
But this is an Obama economy where par time jobs are far too common compared to pre-“O”. In today’s economy it is quite common to change from a part time to full time job. At least, even if the hourly wage is the same or close, the additional hours account for higher take home pay.
In my area I am seeing tremendous turn over in the service industry.
CoRev,
“In today’s economy it is quite common to change from a part time to full time job. At least, even if the hourly wage is the same or close, the additional hours account for higher take home pay.”
You are either joking or you live in some alternate world.
If wages were really growing at some acceptable rate then Total Household Debt would be declining not increasing. And the prices of consumer goods would have been bid up in an inflationary spiral.
Neither of those things are happening.
The Federal Reserve can not cause a normal rate of inflation in the mainstream economy even with a 1.4% Effective Fed Funds Rate.
Both political parties have participated in the economic degradation of the American working class.
No other economic policy was as ruinous as Global Free Trade. It gave corporations too much power over American workers and the US government. American workers could no longer negotiate adequate pay raises and the US government was forced to accept corporations’ shell games with their profits.
JinH, if you are going to refute a comment: “In today’s economy it is quite common to change from a part time to full time job. At least, even if the hourly wage is the same or close, the additional hours account for higher take home pay.”, then at least provide a refutation of what you quoted as pertinent.
You are either joking or you live in some alternate world. Household debt??? My point was a subset of workers(part timers) are changing job (to full time) to get more work hours for more take home pay. Total household debt is for EVERY household, and is a better proxy for confidence in future or below subsistence earnings.
I do agree with your comments re: Global Free Trade, but so much of policy is to raise standards in lesser standards countries. Everyone seems to forget that the effect can be the opposite in the higher standard countries.
The economic bowl is finite, and moving the economic beans contained in it means some gain while others lose. Just look at US wages. The trick is hiding the loss from the losers. Knowing we lost is what you are complaining about.
Most liberals here won’t understand that message.
CoRev,
I have provided a lot of information about total household debt in my comments. But I try not to be repetitive.
Here is a link to the Total Household Debt as reported by the New York Federal Reserve.
See: https://www.newyorkfed.org/microeconomics/databank.html
Click on “Download Data Excel” and that will get an excel spreadsheet back to 2004. Then click on “1999-2003 Excel” and that will get you an excel spreadsheet for those prior years.
Total Household Debt peaked at $12.675Trillions in Q3 of 2008.
Then it went down until it reached $11.153Trillion in Q2 of 2013.
But then it began to rise again and it was $13.148Trillion at the end of Q4 of 2017
This is a bad omen. If households reached the end of their capacity to borrow by Q3 of 2008, then how much more additional capacity do they have now? This last 10 years did not occur in a time large wage increases.
Some number of part time employees getting full time jobs pales in comparison to the significance of increasing Total Household Debt. Or compared to the Feds reticence to raise the effective fed funds rate to the rate that it was in 2007. A few tiny sprouts does not make a garden.
I suppose that I should have been clearer in my earlier comment.
And I am not complaining about the knowledge of the problem, I am complaining about the problem.
Perhaps you meant that if adequate compensation had been provided to the losers then the outcome would have been better. But the winners will never be willing to compensate the losers for their true losses. This was not about a trophy, this was about amassing greater wealth.
NDD,
Your take:
“Initial jobless claims, which I’ve called the single most positive data point in the entire economy, posted nearly a 50-year low at 210,000. On a population- or labor force-adjusted basis, it is an all time low.”
The last sentence above is something that begs to ask why.
“On a population or labor force adjusted basis” it’s so low that it gives cause to ask what is the reason for this huge shift? I’m worried about that…….. celebrating it ignores the why’s and where-for’s which I don’t think are reconcilable with everything else the BLS measures.
Of course I always come from the point of view that if reasons or causations aren’t understood then drawing conclusions about that something means it’ without foundation to support the conclusions… e.g. it’s based on pure belief rather than rationally justified foundations. .
NDD,
As a prominent example of concerns, historically in the US initial jobless claims are at an “all time low” or nearly so, just before the economy hits the skids.
The reason for this is that employers are behind the eight-ball that they believe will propel the economy to yet greater heights.. they’re betting on the come all the time until the economy reverses or their sales or contracts for future sales slump off.
Employers don’t determine when to lay off. they just respond to the factors that force them to which aren’t apparent to them before the fact. Thus layoffs (& this to some extent initial jobless claims) are a dependent variable.. not one of the independent ones.
In that context then initial jobless claims numbers are a lagging indicator.