Saturday, May 5, 2018

Same ol' story- April jobs continue decent growth, but wages still lag

Yesterday was another jobs Friday, and if you concentrate on one side of the report, it seems like a big deal.
The economy generated a solid 164,000 jobs in April to push the unemployment rate below 4% for the first time since Bill Clinton was president, a sign the surging labor market shows no signs ebbing.

That sounds pretty good, especially given that March's job total was revised up by 32,000 to a decent 135,000. But there was a flip side to this report.
The unemployment rate, meanwhile, slipped to 3.9% after holding at 4.1% for six months in a row. Yet the decline owed to a shrinking labor force and fewer people saying they were unemployed instead of an increase in how many people found work.

Despite the ultra-tight jobs market, wages for American workers still aren’t rising rapidly. Hourly pay rose 0.1% to $26.84, the government said Friday. The 12-month increase in pay was flat at 2.6% for the third month in a row.
That’s not so good if you work for a living, but I figured Wall Street would like it. Wall Street always likes it when the economy can “grow” while not paying everyday people in the process. And after starting off lower, the market took off today with the DOW going up 332 points.

If you look inside the jobs report, it’s the same kind of “some good, some not-so-good” theme. For example, if there’s one part of the economy that has worked out as Trump claimed it would, it is that manufacturers and mining/oil industries continue to hire.
Employment in manufacturing increased by 24,000 in April. Most of the gain was in the durable goods component, with machinery adding 8,000 jobs and employment in fabricated metal products continuing to trend up (+4,000). Manufacturing employment has risen by 245,000 over the year, with about three-fourths of the growth in durable goods industries….

In April, employment in mining increased by 8,000, with most of the gain occurring in support activities for mining (+7,000). Since a recent low in October 2016, employment in mining has risen by 86,000.
But there’s a downside here too, as wage growth is lagging behind the already-lame pace that we have in the job market in general.

Year-over-year change, average hourly wages
All private sector jobs +2.56%
Manufacturing +1.36%
Mining/logging +2.13%

You could theorize that maybe younger workers are starting out in these fields and it’s driving the average wages down. But 1-2% raises aren’t going to do much when gas gets up to $2.75 a gallon in a month and housing prices are going up by 5-7% a year.

And as alluded to in the news story on today’s report, the drop in unemployment from 4.1% to 3.9% had little to do with accelerated hiring, and everything to do with people leaving the work force.

Household survey, April 2018
Labor Force -236,000
“Employed” +3,000
“Unemployed” -239,000

AWe had a similar story in March (Labor Force -158,000, Employed -37,000). Now some of this may reverse itself as the weather warms and seasonal blips go away. But it’s worth keeping an eye on, to see if the country is maxing itself out due to Boomers getting older, retiring, and not being replaced in big numbers.

In summary, April was a solid jobs report fitting of a country still in moderate growth and in the mature part of a 9-year expansion. But it’s also not the mark of a country that’s going on a stimulus-funded boom, like the CBO was planning on when it predicted 3.3% GDP growth for 2018 last month (along with $1 trillion deficits within 2 years).

If we don’t see increased wage or job growth soon, you have to wonder if the jobs situation in Spring 2018 is as good as it’s going to get for quite a wile. And it's not feeling all that great right now, is it?

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