Hey, What’d I Miss? OTE 9/30 — 10/06

October 6th, 2014 at 11:28 am
  • On September’s jobs data, explaining why it’s a solid jobs report with one big caveat — stagnant wages. Also, is the strengthening dollar hurting manufacturing employment?
  • Describing the connection between stagnant wages and deep-seeded structural changes that have been zapping worker bargaining power for decades.
  • Discussing the economics of raising the federal minimum wage.
  • Explaining how the jobless rate underestimates the economy’s problems.
  • Examining the potential threat of trade treaties on the US economy.
  • Wondering why former Fed chairman Ben Bernanke couldn’t refinance his mortgage.
  • Laying out one more point President Obama might have added to his economic speech at North Western University.
  • Pointing out some highly misleading ads disguised as articles at the Washington Post.


What’s (not) up with wages?

October 6th, 2014 at 7:31 am

This side of EPI’s Larry Mishel, you’d be hard pressed to find another economist who’s made more noise about wage stagnation in America than yours truly. So when I tell you I’m a bit–that’s just “a bit”–surprised to see such little acceleration in nominal wage growth even as slack has come down significantly, I hope you’ll read on–over at PostEverything.



Sources: BLS, Andrew Levin (a comprehensive measure of labor market slack derived by economist Andrew Levin).

Highly misleading ads disguised as articles at the WaPo

October 3rd, 2014 at 5:17 pm

I’m a big fan of the WaPo, not to mention a contributor (to the very cool and eclectic PostEverything section) and a long-time subscriber. So it really took me aback to see this so-called “sponsor generated content” masquerading as a Post-produced infographic on corporate tax rates. In fact, it’s nothing more than erroneous propaganda placed there by the Chamber of Commerce, bemoaning the high US statutory corporate tax rates with not a word about the fact that few corporations pay anything like that rate (see figure 7 here, for example, showing that no US industry faces an effective of anything like 39%, the US rate in the “infographic”).

Yes, you get to the ad by clicking on this little box I’ve pasted in below from the WaPo’s homepage. And yes, the box is clearly labeled as “sponsor generated content.” But a) do readers know what that means?, and b) if you click through to the infographic, at least to me it looks like it was clearly designed to trick readers into thinking its a real article by a real Post reporter.

Look, if the Chamber or their front group here–Fair Reform for Growth–want to take out an ad, they should of course be able to do so. But this is propaganda posing as unbiased analysis.

To be clear, I too have argued for a lower statutory corporate rate (and broader base), though I always make sure to point out that many corporations, especially the large multinationals, pay far less than that top rate due to loopholes and these firms’ intensive tax avoidance initiatives.

But that’s not the point. The point is that this an illegitimate and misleading development and I urge my home-town paper to stop it.


Source: Washington Post

Manufacturing is lagging the rest of the job market. Is the strengthening dollar a factor?

October 3rd, 2014 at 10:58 am

The jobs report was solid today, providing another month of evidence that the recovery is reliably reaching the job market. But relative to the rest of the employment story, the manufacturing sector has settled into a less favorable trend.

Though American manufacturing came out of its jobs trough with some vigor back in 2010, over the past couple of years, factory job growth has notably slowed, especially compared to the rest of the private-sector job market. Factory employment was up only 4,000 last month and has been flat for the past three months.

Since a stronger dollar makes our manufactured exports more expensive overseas and imports from our trading partners relatively cheaper, it is worth asking if this dynamic could be in play.

The figure suggests that this is certainly a possibility. It shows private sector employment, manufacturing employment, and a trade-weighted index of the dollar against the currencies of our trading partners, with all variables indexed to 100 in January 2010.


Sources: BLS, Federal Reserve

The period of stronger manufacturing employment growth corresponds to the period when the dollar was “more competitive,” i.e., falling relative to the currency values of our trading partners. Conversely, as it has strengthened, factory employment growth has slowed.

Other forces are of course in play, including productivity in the sector. Perhaps the increased use of robotics are to blame. However, that would have to show up in manufacturing productivity and while that’s a jumpy variable, there’s been no uptick in the longer-term trend. Also, labor-replacing technology tends to be a more gradual factor relative to the impact of higher frequency currency movements.

There’s a well-established and common-sense connection between the value of the dollar and the international competitiveness of our manufacturers, so again, this is certainly a plausible explanation for the slowing in factory job growth. Still, it’s a relative short-term trend and it will be worth watching in months to come.

For now, we can conclude that the job market overall is definitely improving at a decent clip, but manufacturing is not quite keeping up. The appreciating dollar is likely one reason for that.

A solid jobs report as the recovery continues to lift employment…though not yet wages.

October 3rd, 2014 at 9:11 am

September turned in strong jobs numbers as payrolls were up 248,000, surpassing expectations (sort of; see below), and the unemployment rate ticked down to a six-year low of 5.9%. August’s initially disappointing payroll count of 142,000 was revised up to a more respectable 180,000, and the average work-week ticked up to 34.6 hours, a post-recession high and a clear sign of an improving labor market.

Analysts expected 215,000, but the BLS pointed out that about 20,000 grocery store workers were back on the payrolls in September after a work stoppage in August. Netting out this number, payrolls only slightly surpassed expectations.

You know my methods, Watson. It’s useful to average out the monthly bips and bops in payrolls, so below I give you this month’s version of JB’s Jobs Day Smoother, showing average monthly job growth over the past three, six, and twelve months.


Source: My analysis of BLS data

The underlying pace of payroll job growth is around 220,000 per month, with a very slight deceleration in recent months. That’s a solid, if not breakneck, pace that will continue to gradually tighten up the job market.

The last time the unemployment rate was below 6% was in July 2008. Moreover, while the labor force fell slightly (though statistically insignificantly) last month, the decline in the jobless rate over the past year has come for the “right” reason: more people finding work, not leaving the job market (you’re only counted as unemployed if you’re actively looking for work).

Let me unpack this observation a bit. The labor force participation rate (LFPR)—the share of the 16 and up population either working or looking for work—is a key variable to watch these days. It ticked down slightly last month, as noted, but as shown in the chart, has generally stabilized over the past year. This has two important implications.


Source: BLS

First, it suggests a strengthening job market as part of the decline in the LFPR over the recession and weak recovery was due to discouraged job seekers giving up hope. Second, as noted above, it means that recent declines in the jobless rate are due to more people getting jobs versus giving up the search.

While the report and the revisions clearly reflect an economic recovery that is reliably reaching the job market, I see at least two trouble spots to watch, both highly significant.

First, wage trends remain flat at 2%, just about the rate of inflation, implying a) stagnant buying power for most workers, and b) the tightening job market hasn’t done much for workers’ bargaining power.

Second, in a point I’ll return to later in the morning, manufacturing employment has slowed notably over the past few months, adding zero jobs on net in September and October. This may be an early reaction to the strengthening of the dollar in recent months, which makes our manufactured exports more expensive in foreign markets (and imports cheaper).

More to come…