Stability in (Part of) the Job Market

June 6th, 2014 at 2:38 pm

This morning I made the point that the job market had settled into a decent trend, but prematurely, i.e., prior to making up the ground lost, or if you prefer (and I do), prior to achieving full employment.

Here’s a picture of the stability to which I’m referring.  It shows the annual percent change in nominal hourly wage growth and payroll employment growth, along with average weekly hours (right axis).  They’ve all been flat, with employment growing around 1.7%, wages around 2% (about the rate of overall inflation), and average weekly hours around 34.5.

Of course, labor force participation is significantly down over the last year, from 63.4% in May of 2013 to 62.8% last month, and that’s just a slice of a longer term negative trend.  And, on the other hand, as I noted this AM, the yearly growth rate of middle-wage workers has accelerated a bit, from 1.9% a year ago to 2.4% now.  So there are bad and good movements afoot, with the bad one–negative LFPR–a very big, bad deal.

But I think it’s fair to say that on some key indicators, despite the very unpleasant Q1 GDP number (-1%), the payroll side of the job market is showing clear stability.  That’s better than the alternative for sure, but that growth rate in jobs needs to kick it up if we’re going to find the path to full employment and importantly, reverse the trend in the LFPR.



Source: BLS

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10 comments in reply to "Stability in (Part of) the Job Market"

  1. Robert Buttons says:

    The long term unemployed aren’t starving. They are working under the table. In many cases, transitioning to a legit job (with loss of means tested bene’s) means a marginal tax rate of 100% or more. Cut the benefits and cut taxes. Problem solved.

  2. D. C. Sessions says:

    as I noted this AM, the yearly growth rate of middle-wage workers has accelerated a bit, from 1.9% a year ago to 2.4% now.

    And that, in turn, is a clear signal for the Fed to hit the brakes. Wages are now exceeding the 2% inflation limit and need to be brought under control.

    • Jared Bernstein says:

      I think you’re kidding, but for those who may think you’re not, remember, they’re looking at the avg wage (really, avg employers’ costs) not this lower-paid subgroup.

      • D. C. Sessions says:

        Not exactly kidding.

        For the past 30 years, the practical interpretation of “full employment consistent with price stability” has been “real wage growth not to exceed our 2% inflation limit.”

        That may not be the stated policy, but it fits the data quite well. The people of the Fed being anything but dummies, over that long a period one has to assume that those results are consistent with their intentions.

  3. Nathan J. Kerr says:

    I am no kool-aid drinker for either side as I am more interested in economics that work than the party that espouses it. So I pose this question in all sincerity.

    It is no secret that with the Democrat party controlling the Senate and the White House that more liberal policies extolled by yourself, Krugman, Baker et al. have been the broad economic policy of the land. It is also no secret that like past administrations (Bush’s, Reagan’s, etc.) policies never fully reach fruition in our perpetually divided government, Obama’s did not either- but that is just the way it is. However, generally, they hold the responsibility based on their ideology.

    With more progressive policies like Sarbanes-Oxley (2002), Dodd-Frank (2009 and 2010), and the Affordable Care Act in addition to non-enforcement of certain immigration laws coupled with marked increase of wealth redistribution through extended unemployment (recently ended), SNAP, and Medicaid expansion- why then is the economy in such doldrums?

    Again, Reagan, Bush, Clinton, W. Bush, and most modern day presidents had divided government so this cannot be the excuse especially with Dodd- Frank, TARP, expansions of welfare etc. being enacted which are big expansions and should have had some impact- what gives?