Friday, January 9, 2015

Big job gains, not-so-big wage gains

Today featured another US jobs report, and it had some good news and some bad news.

Good news
The jobs report shows 252,000 more jobs, and November and December revised up. The preliminary final numbers show that the U.S. gained 2.95 million jobs last year, the largest gain in total jobs in a year since 1999, and the largest private sector job gain since 1997. So apparently the first full year of the Obamacare exchanges weren’t exactly a job-killer, now were they?

The unemployment rate also fell, down from 5.8% to 5.6%. There were a few benchmark revisions for the 2014 year in this report as well, but there was no major difference in the overall rates that were throughout the year (3 months were down 0.1% from previously-published figures, and then the numbers promptly snapped back). It still shows that unemployment has dropped from 7.9% nationwide at the end of 2012 to 5.6% today, a level that we haven’t seen in this country since June 2008.

Not-so-good news
There are a couple of warning lights in this report that show things aren’t as spectacular as the top-lines would indicate. The drop in the unemployment rate, while welcome, also is a reflection of 273,000 people (on a seasonally-adjusted basis) dropping out of the labor force, which means the employment-population ratio of the country stayed at 59.2%, and hasn’t changed since September. Maybe some of that is due to a large number of Boomers retiring and living off of their rising stocks, but it’d be nice to see that figure break 60% at some point (it hasn’t been there since February 2009).

A bigger concern comes from the part of the report that deals with wages.
In December, average hourly earnings for all employees on private nonfarm payrolls decreased by 5 cents to $24.57, following an increase of 6 cents in November. Over the year, average hourly earnings have risen by 1.7 percent. In December, average hourly earnings of private-sector production and nonsupervisory employees decreased by 6 cents to $20.68.
That 1.7% hourly earning raise is a nominal increase, which basically translates to 0% when adjusted for inflation. Maybe there was a larger-than-normal amount of seasonal hiring for the holidays (food service and drinking places were up 43,600 jobs), but that’s the reversion to a bad trend of stagnant wages in the face of strong hiring. Now maybe the numerous states that had minimum wage increases starting with the New Year can bump this figure up for January, but it shows that the average worker is still not seeing a dividend from his/her increased productivity and the higher profits and stock prices that the CEOs have been benefitting from.

1 comment:

  1. Thanks Jake, appreciate your informative updates and analysis.