US and Wisconsin still benefitting from better jobs/wages as Labor Day passes

As Labor Day weekend ends, I wanted to drop a couple of breakdowns about where we are with the jobs market. The first is from Paul Krugman in the New York Times from over the weekend, who notes that job growth has come a long way since Joe Biden became president in January 2021.

”A strong labor market seems to have helped reduce inequality,” @paulkrugman writes. “And the Biden boom may also have indirect effects that will raise wages and reduce inequality further in the future.” https://t.co/tbjG92cX27

— New York Times Opinion (@nytopinion) September 6, 2022

Krugman's first point is that before Biden took office, econimic “experts” were saying that unemployment would still be above 5% in 2022, instead of the 3.7% we are at today. And having all those additional jobs means more income overall for Americans, which is a good thing.

If we include wage gains due to the rising share of Americans with jobs and the rising number of hours for those employed, the Biden boom has, unambiguously, been good for workers’ incomes. Thomas Blanchet, Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley have a new website, Real Time Inequality, that tracks American incomes by source on a monthly basis. They found that overall labor income per working-age adult, adjusted for inflation, rose 3.5 percent from January 2021 to July 2022.

Furthermore, the biggest gains went to the lowest-paid workers. So the Biden boom didn’t just increase overall incomes; it reduced inequality.

This is backed up by the latest US jobs report, which continues to show big annual increases in average hourly wages for 2 of those lower-wage sectors.

Change in average hourly wage, Aug 2021 - Aug 2022
Transportation and Warehousing +8.9%
Leisure and Hospitality +8.7%

That being said, Krugman admits that overall wages for many who have kept jobs since Biden took office in January 2021 haven’t had their wage increases keep up with rising prices (lagging by about 3% among all jobs). But Krugman adds that most of those rising prices are due to significant increases in food and energy prices, which has little to do with anything Biden has or has not done, and a lot more to do with worldwide factors that all nations are dealing with.

Sure, we still pay for those high food and gas prices and it hurts if wages don’t keep up. But Krugman adds that these Bubbles have been popping in recent months while wages have continued to rise (by 0.5% in July and 0.3% in August).

Put it together, and Krugman says that US workers are in a better spot than they were at the end of 2020, and are well-positioned to get even better for the future.

So, yes, the Biden boom has been good for workers. More Americans — a lot more Americans — got jobs, and while those who were already employed suffered a decline in real wages, that decline reflected events in global food and energy markets, not U.S. policy.

Beyond that, a strong labor market seems to have helped reduce inequality. And the Biden boom may also have indirect effects that will raise wages and reduce inequality further in the future. For the sellers’ market for labor may have helped revive America’s long-moribund labor movement.

There has definitely been a surge in attempts to organize workplaces, although there haven’t yet been enough successes to show up in overall unionization statistics. Still, attitudes have clearly changed, and not just among workers. Gallup recently reported that public approval of unions has reached 71 percent — its highest level since 1965.

Paul Krugman of the New York Times, who noted that this economy has come a long way since Joe Biden took office in January 2021.

Kruman's first point is that “experts” were claiming that unemployment would still be above 5% for 2022, instead of the 3.7% we are at today. And having all those additional jobs means more income overall for Americans, and that’s a good thing.

If we include wage gains due to the rising share of Americans with jobs and the rising number of hours for those employed, the Biden boom has, unambiguously, been good for workers’ incomes. Thomas Blanchet, Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley have a new website, Real Time Inequality, that tracks American incomes by source on a monthly basis. They found that overall labor income per working-age adult, adjusted for inflation, rose 3.5 percent from January 2021 to July 2022.

Furthermore, the biggest gains went to the lowest-paid workers. So the Biden boom didn’t just increase overall incomes; it reduced inequality.

Krugman admits that overall wages for those who have kept jobs since Biden took office in January 2021 haven’t kept up with rising prices in that same time (lagging by about 3%). But Krugman adds that most of those rising prices are due to significant increases in food and energy prices, which has little to do with anything Biden has or has not done, and a lot more to do with worldwide factors that all nations are dealing with.

Sure, we still pay for those high food and gas prices and it hurts if wages don’t keep up. But Krugman adds that these Bubbles have been popping in recent months while wages have continued to rise (0.5% in July and 0.3% in August).

Put it together, and Krugman says that US workers are in a better spot than they were at the end of 2020, and are well-positioned to get even better for the future.

So, yes, the Biden boom has been good for workers. More Americans — a lot more Americans — got jobs, and while those who were already employed suffered a decline in real wages, that decline reflected events in global food and energy markets, not U.S. policy.

Beyond that, a strong labor market seems to have helped reduce inequality. And the Biden boom may also have indirect effects that will raise wages and reduce inequality further in the future. For the sellers’ market for labor may have helped revive America’s long-moribund labor movement.

There has definitely been a surge in attempts to organize workplaces, although there haven’t yet been enough successes to show up in overall unionization statistics. Still, attitudes have clearly changed, and not just among workers. Gallup recently reported that public approval of unions has reached 71 percent — its highest level since 1965.

The COVID era likely made a lot of people reasses their working situation, and what is or not an acceptable situation. And we're still the results shake out in 2022.

Closer to home, the Center on Wisconsin Strategy (COWS) released their annual State of Working Wisconsin last week. And COWS says that Wisconsin reflects a lot of the national trends, including a disparate jobs impact among sectors.

From the very beginning of the pandemic, the Leisure and Hospitality sector has faced the most intense changes. Shedding nearly half its jobs in March 2020, the sector has had a dramatic recovery but still holds 6 percent fewer jobs than before the pandemic. Workers in this sector faced the most intense unemployment at the beginning of the pandemic, suffering that piled on top of the low wages, insufficient and volatile hours, and few benefits that these jobs tend to offer. While the underlying structure of these jobs is still a challenge, national evidence suggests that workers are securing some increases in wages and hours of work.

Three other sectors have posted similar losses since February 2020: Other Services (which includes a mix of services including repair and cleaning services) is down 6.8 percent; Government is down 5.4 percent; and Education and Health Services has declined by 3.7 percent. Wisconsin’s declines in Government and Education and Health Services are especially notable because the state’s sectors substantially underperform the national trend.

Wisconsin has four sectors that have grown since 2020: Construction (up 4.5 percent); Trade, Transportation and Utilities (up 0.7 percent); Information (up 1.7 percent); and Professional and Business Services (up 1.5 percent). The growth of Construction is especially strong and far outpaces national trends for the sector.

On the wage side, working Wisconmsinites have also seen a strong increase in pay during the 2020s. COWS says a combination of a tight, strong labor market and the effects of the pandemic are both playing a role here.

There are two explanations for strong wage growth over the last two years. First, sustained economic growth that preceded the pandemic finally showed up in workers’ paychecks. This is unambiguously good news for workers.

A more ominous factor was also at play in increasing wages in 2020. COVID shutdowns disproportionately displaced low-wage workers — particularly restaurant, bar, and hotel workers who lost jobs during the shutdowns. Median wages rose during the shutdowns because lower wage workers lost their jobs. This likely also explains part of the dynamic in wage growth in 2020. As lower wage workers returned to their jobs in 2021, this compositional impact has faded.

Wisconsin's median (inflation-adjusted) wages had stagnated for nearly 15 years, until they finally started rising in the mid-2010s. But things took off in 2019 and 2021, to the point that COWS says our median wages finally passed the US median for the first time in several years.

And COWS also gives evidence of wage inequality being reduced in Wisconsin between 2019-2021, at least if you break it down by race and gender.

COWS doesn't have this breakdown for 2022, so it'll be intriguing to see what we find as our jobs market seems to have maxed out this year. But at both the US and state levels, we see a very strong jobs market that continues to roll as we end the 3rd quarter of 2022.

Which is probably why US central bankers want to stop that growth in the name of "taming inflation". Can't have the plebes get too many choices and feel like they have control, after all.