Got a late start this AM, so just highlights for now, with more analysis to come.
Payrolls rose a mere 20K last month, a huge downside outlier given the recent trends as shown below in our monthly smoother. The average over the past 3-months of 186K is a much more reliable take on the current underlying pace of job growth. Consider, for example, that payroll jobs were up 311K last month, a value well above trend. So, at least for now, consider this downside miss payback for last month’s huge upside.
Of course, the 20K could be harbinger of a downshifting in the pace of payroll job growth. Such a downshift–though not of that magnitude–is not unexpected given a number of facts: job growth slows as we close in on full capacity in the labor market; US GDP is slowing as fiscal stimulus fades (the tax cuts were a sugar high; not a trickle-down miracle); global growth has slowed; the trade deficit–a drag on growth–has increased in recent quarters.
But one month does not a new trend make and it is too soon to tell whether a new trend is underway.
Then there’s the Household Survey
The survey of households, from which the jobless rate is derived, is telling a different story, one more consistent with the trend conditions in the job market (some of these results are bounceback from January’s gov’t shutdown). The unemployment rate ticked down to 3.8 percent and not because people left the labor market (the participation rate was unchanged) but because the unemployed got jobs (employment rose 255,000 in this survey). There was a large, shutdown-related reversal in involuntary part-time work; unemployment for high-school dropouts hit a near-all-time low of 5.3 percent (it was 5 percent last July), suggesting robust labor demand in the low-wage labor market (a key theme of my work in this area is the extent to which persistently tight labor markets help the least advantaged); and the broader underemployment measure (U-6) also fell to a cyclical low of 7.3 percent.
Finally, decent wage growth, nominal and real
The figures show annual changes in nominal hourly wages for all private-sector workers and for the 80 percent who are production, non-supervisors (think “middle-wage workers”), with 6-month moving averages. The story here is that after being stuck at 2.5 percent for a patch around 2017, the tighter job market began to deliver more bargaining power to wage earners, and firms have had to bid wages up, such that hourly pay is now rising about a point faster than it was back then.
Because topline inflation has been held back by low energy prices, the next figure shows a beneficent collision between faster nominal pay and slower price growth, the difference being real earnings growth. I estimate that the CPI for February rose 1.6 percent. If I’m right, real hourly pay for middle-wage workers is up almost 2 percent, a solid pace for real wages that will boost the buying power of working households.
I’m going to jump for now but will be back soon with some compelling figures (if one can say so ones self) showing how low unemployment is boosting wage growth, but faster wage growth is not juicing price growth.