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(What’s Left of) Our Economy: A Great Recession-Like Jobs Report

03 Friday Apr 2020

Posted by Alan Tonelson in (What's Left of) Our Economy

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BLS, Bureau of Labor Statistics, CCP Virus, Employment, Great Recession, Jobs, manufacturing, nonfarm jobs, private sector, {What's Left of) Our Economy

Since this U.S. economic nosedive is, as the Monty Python crew liked to say, “completely different,” this post will depart from its usual format, too – by trying to provide some perspective on today’s horrendous (March) employment report from the Bureau of Labor Statistics (BLS). Unfortunately, this perspective isn’t terribly comforting. 

First, three reminders:

>The insanely astronomical number of jobless claims applications filed in the last two weeks make clear that at least in the near future, the employment situation will become much worse. Specifically, these claims numbers have totaled some 10 million in the last two weeks alone. That’s 7.75 percent of the entire private sector workforce as of the March figures.

>Similarly, as with all the monthly U.S. jobs reports, the March number described the situation only as of mid-month. Most of the economy and broader American CCP Virus-related shutdown measures were mandated or suggested afterwards.

>And in this vein, this morning’s March data were only preliminary. They’ll be revised twice more in the next two months, and then the full-year 2020 results will be revised. Indeed, the job creation figures for January and February (which were still decidedly strong) were downgraded by 57,000 in all.

Having cleared away that brush, it’s still interesting to note that, however terrible the new numbers are – and however terrible-er they’re bound to get – so far the March jobs meltdown hasn’t been as bad as the monthly nosedives suffered during the Great Recession. But it’s already way too close for comfort.

Whereas total nonfarm jobs (the BLS’ U.S. jobs universe) fell on month in March by 701,000, during the previous decade’s punishing downturn, that figure was topped no less than four times, and peaked at 784,000 in January, 2009.

Moreover, no sequential employment growth returned till that November, and it hit just 12,000. Worse, the very next month, payrolls sank by 269,000. The bottom was finally hit in February, and jobs growth recovered slowly afterwards, in fits and starts. Year-on-year employment gains didn’t reemerge until September.

As for private sector jobs, last month’s 713,000 collapse was exceeded during the Great Recession five times, with the worst results coming in April, 2009 (when 812,000 jobs were wiped out).

Private sector employment bottomed in February, 2010, too, and also rebounded sluggishly unevenly, with year-on-year gains coming only in August.

All told, 8.698 million jobs were lost from the onset of the Great Recession (December, 2007) to that February, 2010 trough. For the private sector, the losses totaled 8.794 million. Both figures are alarmingly close to the sum of the last two weeks’ jobless claims.

Interestingly, manufacturing jobs fell by only 18,000 sequentially in March. And on a yearly basis, they’re actually up by 12,000.

But since so many customers for American manufacturers are the workers who are being sidelined, and their former employers who are closing their doors or scaling their operations way back, these numbers, too, are bound to skyrocket.

Will a recovery in manufacturing and overall employment come even as quickly as after the Great Recession (which, again, wasn’t so quick)? Because this slump really is so “completely different” due to its biological origins, that’s the $64,000 Question. Given that a virus second wave is distinctly possible before vaccines or cures are ready, and given that normality as a result is only likely to return slowly to any business or consumer activity that requires close person-to-person proximity, there’s room for plenty of doubt.

 

(What’s Left of) Our Economy: A New Anti-Trade War Argument Bites the Dust

31 Thursday Oct 2019

Posted by Alan Tonelson in (What's Left of) Our Economy

≈ 1 Comment

Tags

BLS, blue-collar workers, Bruce Yandle, Bureau of Labor Statistics, consumers, George Mason University, inflation-adjusted wages, Mercatus Center, private sector, real wages, tariffs, Trade, trade war, Trump, wages, Washington Examiner, work week, workers, {What's Left of) Our Economy

Bruce Yandle of George Mason University’s Mercatus Center has just added a novel claim to the list of catastrophes allegedly triggered by President Trump’s tariff-centric trade policies. In an October 28 Washington (D.C.) Examiner post, He seems to understand that amid rock-bottom rates of U.S. joblessness, it’s getting ever tougher to contend that the trade wars are killing American employment (though the rate of net job gains has certainly slowed in most sectors since the advent of tariffs on steel and aluminum imports in March, 2018).

So Yandle, a former university business school dean, has come up with another reason for the nation’s workers and aspiring workers to hate the curbs on trade: They’re making Americans work too darned hard for the stuff they like to buy. It’s an intriguing idea with just one fatal flaw: It’s not supported by a shred of evidence. P.S.: It takes about 10 minutes of internet surfing and arithmetic-ing to demolish.

Here’s Yandle’s case:

“[T]he occurrence of high employment in the face of a slowing economy can be the result of putting tariff-made rocks in our own harbors to keep out lower-cost foreign goods. When cheaper goods can no longer be imported, we have to work longer and harder to maintain the same level of consumption.

“Low unemployment is something to celebrate but let’s at least note that there are some people who might (quite reasonably) prefer to work a little less with more leisure time and cheaper cars, clothes, and tools, which are some of the goods that have been hit with tariffs.”

I’m unaware of any instances of workers complaining that, “I’d be able to knock off earlier and clean out Walmart if only for those stupid tariffs,” but what I suppose really doesn’t matter. Nor should what anyone supposes matter – because the federal government keeps statistics both on Americans’ hours on the job and their pay.

The results of my research are below. They show hours worked for various major categories of private sector employees, and the change in their hourly inflation-adjusted wages, over two relevant time periods. The first goes from the first full month of the Trump administration (February, 2017) through the latest data month (this September – tomorrow the Bureau of Labor Statistics (BLS) will release the October numbers), and from the first full month of the administration’s first important tariffs (April, 2018, for the steel and aluminum levies) through September. (Government employees’ wages aren’t monitored by BLS because their pay is set largely via politicians’ decisions, and therefore says little about the economy’s fundamental strengths or weaknesses.)

Total private weekly hours since Trump inauguration: 34.3 to 34.4

Total private weekly hours since 1st (metals) tariffs: 34.5 to 34.4

Total blue-collar weekly hours since Trump inauguration: 33.6 to 33.6

Total blue-collar weekly hours since 1st (metals) tariffs: 33.8 to 33.6

Total manufacturing weekly hours since Trump inauguration: 40.7 to 40.5

Total manufacturing weekly hours since 1st (metals) tariffs: 41.0 to 40.5

Total manufacturing blue-collar weekly hours since Trump inauguration: 41.9 to 41.5

Total manufacturing blue-collar weekly hours since 1st (metals) tariffs: 42.4 to 41.5

Total private real hourly wage since Trump inauguration: +2.53 percent

Total private real hourly wage since 1st (metals) tariffs: +.1.86 percent

Total blue-collar real hourly wage since Trump inauguration: +3.05 percent

Total blue-collar real hourly wage since 1st (metals) tariffs: +2.49 percent

Total manufacturing real hourly wage since Trump inauguration: +0.46 percent

Total manufacturing real hourly wage since 1st (metals) tariffs: +0.83 percent

Total manufacturing blue-collar real hourly wage since Trump inauguration: +2.77 percent

Total manufacturing blue-collar real hourly wage since 1st (metals) tariffs: +1.25 percent

For every category except two, over both time periods, workers’ weekly hours went down, and their real wages went up. That is, their leisure time and the buying power of their pay both have risen. They’ve been working less and been able to purchase more.

The first exception is overall private sector workers. Since Mr. Trump’s administration began, their work week has edged up – a tenth of an hour. Even so, their pay rose faster. So they don’t have much cause to complain about working too hard and enjoying the fruits of their labor less.

The second exception entails the overall blue-collar workforce (called “production and nonsupervisory employees” in BLS-ese). Its work week has stayed the same since the Trump inauguration. At the same time, however, this group experienced the fastest wage increase during this period. And its pay in constant dollars went up even faster after the metals tariffs were imposed – as its workweek dipped.

Moreover, this points to another problem with Yandle’s case:  All four categories of workers saw their workweek fall faster after the tariffs’ imposition than before. And in three of the four (except for manufacturing blue-collar workers) wages rose faster after the tariffs went on as well.

And in case you’re wondering, to create some context, whether American workers recently have been significantly better off in the absence of tariffs and trade wars, the answer is, “Not consistently during the current economic recovery.”

No one’s saying that these results show that the United States is a workers’ paradise, or is becoming one because of the Trump tariffs. But if anyone has a right to be grumpy about the above trends, it’s trade mavens like Yandle, who are pushing fact-free arguments to take the levies down.

(What’s Left of) Our Economy: U.S. Manufacturing’s Productivity Lag Just Got Even Worse

16 Friday Aug 2019

Posted by Alan Tonelson in (What's Left of) Our Economy

≈ 1 Comment

Tags

BLS, Bureau of Labor Statistics, labor productivity, manufacturing, multi-factor productivity, non-farm business, productivity, total factor productivity, {What's Left of) Our Economy

If there were two of me, I could have reported yesterday on both the new industrial production figures from the Federal Reserve and the new labor productivity data from the Bureau of Labor Statistics (BLS) that came out. Because progress in cloning tech has been incredibly disappointing, and since Washington keeps often pairing such releases, I had to choose one (the former). But the latter’s importance should never be forgotten, especially since it shows manufacturing’s performance on this crucial front has actually deteriorated, at least in a relative sense. This development, in turn, has big implications for President Trump’s tariff-heavy trade policies.

After all, these Trump levies, whether on metals or on products from China, increase cost pressures at various stages of individual companies’ production process or at various stages of industry supply chains when (as they often do) they cross national borders.

As a result, the companies involved can respond with various combinations of the following measures: They can increase the prices they charge to their customers (whether they’re other businesses, in the case of inputs used in producing goods and services, or consumers, in the case of the kinds of products sold by retailers). They can find alternative sources of supply (which rarely happens right away). They can eat the higher costs, and accept lower profits, in hopes of preserving market share. Or they can improve their productivity, and therefore offset the impact of higher costs through improved efficiency.

That last option is (which involves more than simple cost-cutting) is the best for the economy, including for workers, in the long run, since it’s a time-tested formula for boosting growth and living standards on a sustainable basis. But manufacturing’s deteriorating record in this regard indicates that American industry overall is failing this test.

To remind, labor productivity is the narrower of the two such measures of efficiency tracked by the BLS. It simply reveals how much of a particular good or service can be produced by the relevant workforce (adjusted for inflation) per each hour on the job. As the name implies, the broader measure, multi-factor productivity (also called total factor productivity) measures output per worker hour as a function of the use of many different inputs – e.g., capital and energy, as well as labor.

The manufacturing labor productivity lag becomes clear upon examining the latest results. It’s true that the sector’s first quarter sequential growth (at an annual rate) was revised up from 0.4 percent to 1.1 percent. But the comparable figure for non-farm businesses (BLS’ definition of the American economic universe for productivity measurement purposes) was much better – a 3.4 percent annualized gain revised up to 3.5 percent.

The gap widened further in the second quarter, at least according to yesterday’s preliminary results. Non-farm business labor productivity rose again, albeit at a slower 2.3 percent annual rate. But in manufacturing, labor productivity actually fell in absolute terms – by 1.6 percent at an annual rate.

Even more alarming are the longer-term trends, which are especially visible thanks to the labor productivity revisions going back to 2014 released by the Labor Department along with the preliminary second quarter results. Here are the pre-revision results for the last three economic expansions, including the one still ongoing, through the first quarter of this year. (RealityChek regulars know that the most useful economic analyses compare results during similar stages of the business/economic cycle.)

                                                                           Non-farm business   Manufacturing

1990s expansion (2Q 1991-1Q 2001):                 +23.74 percent      +45.86 percent

bubble expansion (4Q 2001-4Q 2007):                +16.59 percent     +30.23 percent

current expansion: (2Q 2009 thru prev 1Q19):    +12.18 percent        +9.59 percent

These numbers demonstrate how the growth rate of labor productivity in manufacturing has slowed much more dramatically than that of the overall non-farm business sector.

Here are the results for the current expansion incorporating the revised first quarter figures:

                                                                          Non-farm business    Manufacturing

1990s expansion (2Q 1991-1Q 2001):               +23.74 percent        +45.86 percent

bubble expansion (4Q 2001-4Q 2007):              +16.59 percent        +30.23 percent

current expansion: (2Q 09 thru revd 1Q19):      +12.16 percent          +9.64 percent

Manufacturing’s performance ticked up and the non-farm business sector’s performance ticked down, but the big picture didn’t change much. And now for the results incorporating the preliminary second quarter results:

                                                                        Non-farm business   Manufacturing

1990s expansion (2Q 1991-1Q 2001):              +23.74 percent       +45.86 percent

bubble expansion (4Q 2001-4Q 2007):             +16.59 percent       +30.23 percent

current expansion: (2Q 09 thru prelim 2Q19):  +12.80 percent         +9.19 percent

Because of the second quarter’s non-farm business growth and manufacturing’s decline, the gap between the two became even bigger – and manufacturing’s longer-term slowdown became even more dramatic. 

And as if this big picture wasn’t bad enough, let’s not forget that much of manufacturing’s recent recorded labor productivity gains have come from a methodological oddity that results in the offshoring of production strengthening the labor productivity results.  That’s the kind of productivity improvement that the domestic economy clearly doesn’t need.  And revealingly, for all the claims over the years that offshoring is a plus for that domestic economy, including for its workers, the evidence sure isn’t showing up in the manufacturing labor productivity data.   

An optimist could note that these preliminary second quarter results represented manufacturing’s worst readings since the first quarter of 2018, and that the second quarter results can still be revised upward. A pessimist could reply, especially regarding the latter, “They’d better be.”

(What’s Left of) Our Economy: A Stunning Downgrade for U.S. Manufacturing Labor Productivity Growth

11 Monday Dec 2017

Posted by Alan Tonelson in Uncategorized

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Tags

BLS, bubbles, Bureau of Labor Statistics, David P. Goldman, Financial Crisis, Great Recession, labor productivity, manufacturing, multi-factor productivity, non-farm business, offshoring, productivity, recovery, total factor productivity, unit labor costs, {What's Left of) Our Economy

Wow! There were so many important results flowing from last week’s final (for now) government data on third quarter U.S. labor productivity, I hardly know where to begin. (I’m also feeling a little sheepish about waiting so long to report on these data, but it’s just another sign that we’re living in a target-rich commentary environment, as RealityChek‘s motto suggests.) But after finishing this post, I feel confident you’ll agree that the big downward historical revisions to manufacturing labor productivity growth deserve the most attention.

Not that the new figures on overall labor productivity (for the so-called non-farm business sector) were anything to sneeze at. These new numbers cover the narrowest measure of productivity (gauging only output per hour worked by an individual American employee) but as known by RealityChek regulars, they’re issued on a much more timely basis than the multi-factor or total factor data – which measure the output generated by a wide range of inputs.

And this update on third quarter labor productivity confirmed that it grew at its highest sequential annualized rate (2.95 percent) since the third quarter of 2014 (4.34 percent). The revised labor productivity gain was actually a touch smaller than the originally reported 2.97 percent rise, but not nearly enough to change the overall story. If this rate of improvement continues, that would be excellent news, since strong productivity growth is an economy’s best bet for a sustainable increase in economic growth and living standards.

At the same time, analyst David P. Goldman has noted that the new data add to compelling evidence that recent years have seen a reversal in the relationship most economists have long assumed (and that was borne out by by these same statistics) between unit labor costs (a main labor component of the productivity statistics) and the broadest measures of unemployment. As Goldman just observed, normally, they move in opposite directions – i.e., when joblessness is rising, the price of labor generally (and logically) falls, and vice versa. But since 2014, unemployment has kept tumbling, but labor costs have fallen as well. If this trend continues, that would be much worse news, since it would undermine the portrayal of productivity growth as a boon to the nation’s workers. (And a richly deserved hat-tip to a Twitter follower of mine, who goes by “Field Roamer” for calling my attention to this post.)

It’s been clear throughout this current U.S. economic recovery that wage growth has been unusually weak, but Goldman’s post paints the paycheck picture in a much grimmer light, and that’s definitely worth exploring further.

But to me, the manufacturing revisions deserve center stage, both because of their magnitude and the long time frame they cover – all the way back to 1987, when manufacturing labor productivity began to be tracked. I’ll let the Bureau of Labor Statistics (BLS), which calculates productivity for the U.S. government, summarize its dreary conclusions:

“A large upward revision to the change in the annual manufacturing productivity index from 2008 to 2009 was more than offset by downward revisions in adjacent years, and the average annual rate of growth from 2007 to 2012 was revised down from 2.9 percent to 1.2 percent. The average annual rate of manufacturing productivity growth during the current business cycle from 2007 to 2016 was revised down from 1.6 percent to 0.9 percent, and the long-term rate for the entire series from 1987 to 2016 is now 2.8 percent, compared to the previous estimate of 3.2 percent.”

In other words, over roughly the last thirty years, labor productivity in industry has risen 12.50 percent more slowly than previously reported. And manufacturing’s performance on this crucial front wasn’t great to start with.

Another way to look at the new numbers is to see how they affect what we know of America’s manufacturing labor productivity performance during the most recent economic expansions – a method that gives us the best apples-to-apples data. If your jaw doesn’t drop, it should.

The 1990s expansion still comes across as a period of robust manufacturing labor productivity growth. The cumulative increase was downgraded only from 46.81 percent to 45.94 percent.

But check out the new results for the previous decade’s recovery. Viewed through the lens of the old productivity data, its performance was excellent, and surprisingly so. After all, this expansion was fueled by the inflation of the credit and housing bubbles whose bursting led to the global financial crisis and the Great Recession. Yet the BLS had been saying that its cumulative productivity gain was 41.23 percent – just about as good as the 1990s advance factoring in this recovery’s shorter duration.

The new numbers – only 30.08 percent manufacturing labor productivity growth – are much more consistent with the idea that the previous economic recovery was marked largely by phony, unsustainable growth.

And as for the present recovery? The old data already made clear what a productivity disaster it’s been. Though it’s lasted nearly as long as the 1990s expansion, the previous BLS data pegged its total manufacturing labor productivity growth at only 20.93 percent – just about half the rate generated during the 2000s expansion.

The new rate? Only 9.41 percent, meaning its been cut nearly in half. Moreover, according to the new figures, the current recovery’s manufacturing labor productivity growth rate represents a much greater deterioration from the performance of the bubble recovery than had been reported. At least by this measure, American economic growth was already appearing even less healthy these days than it was leading up to the last meltdown produced by fake prosperity. Now this problem looks much worse. 

In addition, don’t forget:  Even these dreadful numbers probably overstate manufacturing labor productivity’s advances. Why? Because as the BLS acknowledges, its methodology for calculating this indicator include the effects of offshoring: simply substituting foreign workers for American workers. Since the total number of workers doesn’t change, the productivity figures for U.S. factories and related facilities are artificially inflated – and for reasons having nothing to do with greater efficiency. 

And these results raise all sorts of perplexing questions. For example, I’ve been arguing for quite some time that the overall slowdown in American labor productivity growth must surely stem from the trade- and offshoring-related losses of so much domestic industry – which has generally been the economy’s productivity growth leader. But the new BLS statistics indicates that there could be a bigger labor productivity growth problem within manufacturing itself. Alternatively, these losses could have been concentrated in especially high-productivity sectors of manufacturing – or trade and offshoring have had little or nothing to do with the problem to begin with.

More light could be shed on these questions by comparing America’s manufacturing labor productivity performance with that of other countries. Has it been better? Worse? Some short-range data I’ve seen indicate that the slowdown has been widespread across the globe, at least between 2015 and 2016. But I need to dive much deeper into these statistics to draw firmer conclusions.

Further, how significantly will these new labor productivity results affect the broader multi-factor productivity results? BLS hasn’t scheduled its next report on this indicator, so my oft-used advice to “stay tuned” applies to me, too, in this case.

(What’s Left of) Our Economy: The Dubious Labor Shortage Claims Keep Coming

20 Friday Oct 2017

Posted by Alan Tonelson in (What's Left of) Our Economy

≈ 4 Comments

Tags

BLS, Bureau of Labor Statistics, healthcare, Immigration, labor shortages, nurses, nursing, Reuters, wages, West Virginia, {What's Left of) Our Economy

Perhaps some day we’ll find out when it apparently became mandatory for journalists to write articles about supposed labor shortages in the American economy without once mentioning the word “wages.” For now, RealityChek will have to settle for citing yet another example of this phenomenon that contains an interesting twist: The reporter in question did look at some data from the Bureau of Labor Statistics (BLS), the U.S. Labor Department division that gathers and publishes employee compensation figures. But she still left out BLS numbers on wages and salaries.

According to Jilian Mincer of Reuters:

“Hospitals nationwide face tough choices when it comes to filling nursing jobs. They are paying billions of dollars collectively to recruit and retain nurses rather than risk patient safety or closing down departments, according to Reuters interviews with more than 20 hospitals, including some of the largest U.S. chains.

“In addition to higher salaries, retention and signing bonuses, they now offer perks such as student loan repayment, free housing and career mentoring, and rely more on foreign or temporary nurses to fill the gaps.”

And as indicated above, she is clearly familiar with the BLS as a reliable source of information on the American employment picture. Later in the article, she writes that “Nursing shortages have occurred in the past, but the current crisis is far worse. The Bureau of Labor Statistics estimates there will be more than a million registered nurse openings by 2024, twice the rate seen in previous shortages.”

But for some reason, she didn’t mention the BLS wage data – a crucial omission because everything we (think we) know about economics tells us that when anything, including labor, is scarce, its price (pay in this case) will rise until the greater rewards attract an adequate supply. Common sense supports this analysis, too. If employers are scrambling to fill jobs, it stands to reason they’ll offer better pay to make sure they and not their competition attract the needed workers.

And what the BLS data tell us is that no such scramble is taking place – or at least not enough of one to bid up wages. The last year for which detailed data for occupations (as opposed to sectors of the economy) is available is 2016. The numbers say that last year, the mean (average) national annual wage for registered nurses was $72,180 before inflation, and the mean hourly wage was $34.70.

Now let’s go back five years. The 2011 numbers? An annual mean wage of $69,110 and an hourly median wage of $33.23 per hour. So pay by these key measures wages rose by 4.44 percent over those five years and 4.42 percent, respectively. And again, that’s before adjusting for inflation. Does that sound like the hospitals and other healthcare providers that employ nurses are desperate for more?

Even stranger: Nursing pay has been rising more slowly than pay overall during this period. Between 2011 and 2016, mean annual wages for all occupations were up 9.73 percent, and mean hourly wages were up by 9.75 percent. That’s more than twice as fast! (See the same links that contain the national nursing figures.)

In fairness, Reuters’ Mincer looks at an additional nursing issue – the labor situation in rural areas, which she describes as especially dire. And it does seem to make some intuitive sense that small towns and farm communities would have special difficulties staffing medical facilities. But the numbers don’t seem to back up that story, either.

The author spent considerable space reporting on West Virginia. But the BLS numbers show that, between 2011 and 2016, both hourly and average nursing pay advanced by 4.50 percent. That’s only slightly more than the national rates of increase.

Yes, Mincer’s piece did talk a lot about healthcare providers offering “higher salaries, retention and signing bonuses [and] perks such as student loan repayment, free housing and career mentoring….” It’s entirely possible that she’s right. (The government doesn’t keep detailed occupational figures on these scores.) It’s also entirely possible that the data that is tracked by BLS is way off base. But when you’re claiming “labor shortage,” shouldn’t you at least mention that the most comprehensive facts available about base pay say nothing of the kind?

Moreover, buried in the article – indeed at the end of the quote immediately above – is a clue to the apparent paradox: Mincer’s observation that the healthcare industry is relying “more on foreign…nurses to fill the [employment] gaps.”

If true, that would make clear that lax immigration policies are still enabling nurses’ employers to suppress pay by easing any shortages in the domestic labor force by hiring immigrant nurses who will work for significantly lower pay than native-born workers. And it would suggest that the Cheap Labor lobby encompassing so many American businesses is still able to keep these wage-suppressing global labor pipelines open by peddling a steady stream of warnings about bogus labor shortages to gullible journalists.

(What’s Left of) Our Economy: Murky Jobs Signals from the New JOLTS Report

11 Tuesday Apr 2017

Posted by Alan Tonelson in Uncategorized

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BLS, Bureau of Labor Statistics, Federal Reserve, healthcare services, Janet Yellen, Jobs, JOLTS, recovery, subsidized private sector, turnover, {What's Left of) Our Economy

Economy-watchers just got another reminder today of how difficult it remains to figure out how healthy the current recovery is – from the data on employment turnover released by the Labor Department’s Bureau of Labor Statistics (BLS). The biggest surprise they delivered concerned the numbers of job openings reported (preliminarily) for February in the economy’s subsidized private sector.

Whereas the last few months of BLS data indicate that hiring in industries like healthcare services (which are heavily dependent on government support) hasn’t been quite so outsized as over the last decade, the new job turnover numbers (commonly known by their acronym JOLTS) suggest that they’re still punching above their weight.

If you think – as you should – that the real private sector should flat-out dominate job creation because it’s the economy’s leader in productivity and innovation, that’s not such a great development.

For the first three months of this year, the subsidized private sector accounted for 18.57 percent of the 533,000 total net new jobs America created. During the first three months of last year, this figure was 21.26 percent. These numbers will be revised several times more, but so far they signal that subsidized private sector jobs gains have lost some of their relative steam. (For more on the robust hiring in these industries during the current recovery, see this recent post.)

But the job turnover data appear to be sending the opposite message. Here we only have statistics going through February, and they’ll be revised down the road, too. But for the first two months of this year, 19.38 percent of the 11.368 million total job openings have come in the subsidized private sector. For the first two months of 2016, that figure was only 17.76 percent. In fact, the 1.138 million job openings estimated in the subsidized in February were the highest monthly total ever in absolute terms. (This data series started in 2000.)

To be sure, the subsidized private sector’s share of total job openings this year is a little below the levels that have held for most of the recovery. (See this post for more detail.) But its year-on-year rise is tough to square with the relative decline in actual job creation.

Another noteworthy result found in today’s job turnover report: The decline of retail job opportunities comes through plain as day. It’s not that the sector, whose bricks-and-mortars segment is under such tremendous pressure from on-line shopping, isn’t reporting any job openings at all. In fact, at 541,000 in February (on a preliminary basis), they were on the low end but still respectable by the standards of the last few years.

Look at the year-on-yer change, however, and you can see the retail employment problem. Reported job openings during January and February combined were down nearly ten percent. Those kinds of drops haven’t been seen since early in the recovery, in 2010.

These employment-related developments stand in especially stark contrast to the Federal Reserve’s apparent conclusion that the economy is just about fully recovered, and that the central bank’s new priority is sustaining “what we have achieved,” as chair Janet Yellen declared yesterday. This approach of course entails continuing to raise interest rates gradually, and reducing the immense amount of bonds the Fed bought as part of its stimulus program. Here’s hoping that the Fed’s confidence more accurately reflects the true state of the economy than these latest figures.

(What’s Left of) Our Economy: With the Fed Seemingly Set to Tighten Again, Real Wages are in Recession

15 Wednesday Mar 2017

Posted by Alan Tonelson in Uncategorized

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Tags

BLS, blue-collar workers, Bureau of Labor Statistics, Federal Reserve, Great Recession, inflation-adjusted wages, manufacturing, real wages, recovery, Trump, wages, {What's Left of) Our Economy

If you had any doubts that American workers are experiencing a dramatic slowdown in inflation-adjusted wages, the newest figures on this pay indicator just put out by the Bureau of Labor Statistics (BLS) should emphatically dispel them. In fact, they make clear that the nation is now stuck in a technical real wage recession – meaning that constant dollar hourly wages have fallen on net for at least two straight quarters. Moreover, when looking over the last two years, the worst results have been registered in price-adjusted hourly pay for blue-collar workers.

Keep that in mind if the Federal Reserve, as expected, announces a new tightening of monetary policy this afternoon, in large measure because the U.S. labor market supposedly has healed the wounds suffered during the Great Recession and the historically weak recovery that followed it.

For all private sector workers and for manufacturing workers, constant dollar hourly pay is down 0.19 percent since last March. And for blue-collar workers in these swathes of the economy, the story actually is slightly worse. Production and non-supervisory employees in the private sector overall have seen their after-inflation hourly pay fall by 0.33 percent since last February. For their counterparts in manufacturing, real wages are down 0.12 percent since December, 2015. (Government workers’ wages aren’t tracked by BLS, because they’re set largely by politicians’ decisions, not by market forces. Therefore, they tell us little about the economy’s fundamentals.)

And the new real wage figures add to the evidence – presented at RealityChek last month – that increases in such take-home pay adjusted for prices have slowed dramatically over the last year.

Here are the new numbers for all private sector workers:

February, 2014-15: +2.03 percent

February, 2015-16: +1.33 percent

February, 2016-17: 0 percent

And the new results for private sector production and non-supervisory workers:

February, 2014-15: +2.15 percent

February, 2015-16: +1.77 percent

February, 2016-17: -0.33 percent

Here are the figures for all manufacturing workers”

February, 2014-15: +1.33 percent

February, 2015-16: +1.32 percent

February, 2016-17: +0.09 percent

And finally, here are the new data for blue-collar manufacturing employees:

February, 2014-15: +1.90 percent

February, 2015-16: +1.75 percent

February, 2016-17: -0.57 percent

In fact, the only piece of good news in the new BLS report is that the January and February real wage figures are still preliminary. But unless they see unprecedented upward revisions, or constant dollar wages enjoy a strong rebound in the next few months, expect the real wage numbers to start turning up the political heat both for a Federal Reserve that’s apparently thinking “Mission Accomplished,” and a president apparently convinced that his mere election is speeding up the recovery.

(What’s Left of) Our Economy: Despite Strength in February, Manufacturing’s Jobs Recession Continued

10 Friday Mar 2017

Posted by Alan Tonelson in (What's Left of) Our Economy

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BLS, Bureau of Labor Statistics, inflation adjusted wages, Jobs, manufacturing, non-farm payrolls, recession, recovery, wages, {What's Left of) Our Economy

February’s preliminary U.S. manufacturing jobs figures showed that the sector boosted payrolls by 28,000 – its best performance since the same total for January, 2016, but that its jobs recession continued, with employment down on net since that month. Manufacturing wage growth, moreover, showed some weakness, as average hourly pay improved by just 0.04 percent on month (lagging the overall private sector) and the yearly improvement of 2.89 percent was mediocre by the last few months’ standards.

The positive manufacturing jobs revisions for December and January brightened former President Obama’s record for employment creation in the sector, but the increase still fell short of his stated second term goal of creating one million new positions in industry by 625,000.

Despite the good February monthly advance – plus the sector’s first annual employment increase (7,000) since last July – manufacturing jobs as a share of the non-farm total hit a new record low of 8.49 percent. Nor did the February results change manufacturing’s status as an American employment and wages laggard. Since the mid-2009 onset of the current economic recovery, industry employment is up only 5.59 percent, versus the 11.28 percent for the nation as a whole, and pre-inflation wages have risen by 14.51 percent versus the 17.84 percent rise for the entire private sector.

Here’s my analysis of the latest monthly (February) manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics:

>The first full (though preliminary) monthly tally of President Trump’s manufacturing job creation record showed that even a strong February – which saw industry’s payrolls grow by 28,000 on net – wasn’t enough to pull the sector out of its latest jobs recession.

>Although the February results were manufacturing’s best since January, 2016’s (which were identical), the sector’s employment is still below that month’s total by 5,000 on net.

>In addition, manufacturing wages displayed signs of weakness in February. Their pre-inflation sequential increase of 0.04 percent trailed that of the overall private sector (0.23 percent) for the second straight month.

>Year-on-year, however, manufacturing’s wage performance looks better. Hourly pay rose by 2.89 percent versus the 2.80 percent figure for the private sector. Manufacturing held the edge in January, too, but the gap was wider (2.89 percent versus 2.60 percent).

>The new Labor Department release also showed that former President Obama’s record as a manufacturing jobs creator was somewhat better than previously reported. Net new manufacturing jobs still rose much less (a total of 375,000) than the one million goal he set for his second term. But positive revisions for January and February boosted manufacturing positions by 13,000 during those years.

>The last three months’ totals also did nothing to halt the historic slide in manufacturing’s share of total non-farm employment. In February, this figure hit a new record low of 8.49 percent.

>On the brighter side, the February yearly manufacturing jobs increase of 7,000 was the first such advance since the 7,000 annual growth last July.  Nonetheless, it compared poorly with the 69,000 year-on-year gain reported for the previous Februarys.  

>Even so, manufacturing remains a jobs and wages laggard during the current economic recovery. Since the economy returned to expansion mode in June, 2009, industry employment is up by only 5.59 percent – less than half the 11.28 percent advance recorded by the private sector as a whole.

>Since its 2010 employment bottom, manufacturing has now regained 929,000 (40.51 percent) of the 2.293 million jobs it lost during the recession and its aftermath. By contrast, the private sector overall lost 8.801 million jobs from the recession’s December, 2007 onset through its February, 2010 absolute employment low. Since then, it has increased net employment by 16.217 million.

>Moreover, whereas total private sector employment is now 6.41 percent higher than at the recession’s beginning, in late 2007, manufacturing employment is still 9.92 percent lower.

>On the wage front, pre-inflation manufacturing pay has risen by 14.51 percent during this recovery – again slower than the 17.84 percent for the entire private sector.

>Adjusting for inflation, manufacturing’s wage performance looks much worse. The latest figures only cover January, but they show that real hourly pay in the sector is up only 0.65 percent since the recovery began in mid-2009 – more than seven years ago. Real wages in the private sector overall are up 3.39 percent.

(What’s Left of) Our Economy: Productivity as the Main Manufacturing Job Killer Debunked Again

08 Wednesday Mar 2017

Posted by Alan Tonelson in (What's Left of) Our Economy

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automation, BLS, Bureau of Labor Statistics, Department of Labor, Jobs, labor productivity, manufacturing, offshoring, productivity, Trade, {What's Left of) Our Economy

Here’s a curious phenomenon that America’s political leaders and media need to focus on more: Practitioners of what I call fakeonomics keep prattling on about how the nation’s trade policy has almost nothing to do with the woes of domestic manufacturing and its workers, and that more automation and other forms of productivity gains are almost entirely to blame. At the same time, the official (and most authoritative) data keep proving them wrong. Just look at the latest figures, from this morning’s government report on America’s labor productivity.

These figures – from the Labor Department’s Bureau of Labor Statistics (BLS) – measure how many hours of human work it takes the U.S. economy to produce a given quantity of output. So although they don’t directly gauge the role being played by machines and software of all kinds in American industries (including manufacturing), they’re no doubt an excellent proxy for automation levels and how they’re changing. In other words, if labor productivity is rising at a respectable rate, then it’s reasonable to conclude that at least lots of job loss is indeed attributable to the adoption of labor-saving technologies – as opposed to more net imports or more job offshoring. And the opposite holds logically, too,

As I’ve written, BLS itself admits that its published numbers likely overstate labor productivity growth for the whole economy – and therefore, it would seem, the automation rate. But even leaving aside this flaw, the new numbers once again show that “respectable” is the last adjective that’s appropriate to describe improvement lately in this gauge of efficiency.

BLS’ new figures for the fourth quarter of 2016 and for that full calendar year incorporate comprehensive revisions going back to 2012. Given how many quarterly and annual figures have been updated, the most efficient way to show how miserable productivity growth has been recently, and how weakly it’s correlated with manufacturing employment, is to show how the previous figures for the last three economic recoveries before the new adjustment and after it. (As discussed before, comparing economic performance during similar phases of a business cycle – e.g., recoveries versus recoveries, or recessions versus recessions – is the best way to get apples-to-apples data.)

Here are the manufacturing employment and manufacturing labor productivity changes for the expansion of the 1990s (as presented in this previous post):

manufacturing employment: -0.38 percent

manufacturing labor productivity: +46.78 percent

And here are the results for the shorter expansion of the 2000s (taken from the same post):

manufacturing employment: -12.44 percent

manufacturing labor productivity: +41.08 percent

And here are the results reported in that post for the current expansion – which has been longer than that of the previous decades, but not quite as long as its 1990s predecessor:

manufacturing employment: +4.68 percent

manufacturing labor productivity: +22.88 percent.

Where do the new revisions leave us? Manufacturing employment is now up 5.24 percent. And the sector’s labor productivity is now up 22.70 percent. In other words, it’s productivity growth has been slightly weaker than previously estimated – when it was already historically lousy.

It’s hard to escape the obvious conclusion: It’s high time for globalization cheerleaders to stop letting trade off the hook for major manufacturing job loss – and transition to work that’s actually productive.

(What’s Left of) Our Economy: Inflated Claims of Real Wage Inflation

19 Friday Feb 2016

Posted by Alan Tonelson in (What's Left of) Our Economy

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BLS, blue-collar workers, Bureau of Labor Statistics, inflation, inflation-adjusted wages, labor market, private sector, productivity, recession, recovery, wages, workers, {What's Left of) Our Economy

This morning’s real wage figures from the Bureau of Labor Statistics (BLS) once again vividly remind us how important baselines are in measuring economic trends and evaluating their strengths. They just as vividly underscore the importance of overall inflationary and deflationary trends in the economy in calculating these wage data – which especially over the short term have nothing to do with workers’ genuine earnings, bargaining power, and success in keeping up with living standards. To me, the bottom line for these latest (January, 2016) numbers is that real wages in America continue to go nowhere.

BLS reported today that inflation-adjusted wages for the entire private sector rose by 0.38 percent month-on-month – the best sequential advance since August’s virtually identical reading. (Government workers aren’t measured here because their pay is determined overwhelmingly by politicians’ decisions, not fundamental labor market conditions.)

Moreover, the December monthly constant dollar wage improvement was revised up from 0.09 percent to 0.19 percent. As a result, the December year-on-year (and full-year 2015) figure increased from 1.82 percent to 2.01 percent. That’s the best such performance since 2008 – when many employers facing a strengthening recession were quickly shedding less experienced, lower-paid workers and therefore statistically pushing real wages way up.

Yet the new January number (which, like December’s, is still preliminary), means that January, 2015-January, 2016 after-inflation wage increases totaled only 1.14 percent. That’s much lower than 2014-2015’s 2.43 percent, but much higher than the previous 0.39 percent advance. In fact, the most recent January-January increase was the biggest such improvement 2009’s 3.70 percent – which was also boosted by the aforementioned recession-era downsizing strategy.

At the same time, here’s where those problematic economy-wide inflation data come in. January, 2015 was one heck of an unusual inflation month. Sequentially, core prices fell then by 0.64 percent. That’s the biggest drop by far since December, 2008, when the financial crisis was peaking and the economy seemed about to fall off a cliff. The harsh winter weather at the end of 2014 and the start of 2015 was clearly a big reason, and it has major effects on all comparisons based on January, 2015.

Another problem with this (and previous) January data: As I’ve previously noted, lots of state and local minimum wage hikes have kicked in during those months. These government-mandated decisions have as little bearing on labor market conditions as the government’s own pay levels.

So my own preference is to look over the longer term, and in particular, to compare real wage trends among recent economic recoveries – which provides the best apples-to-apples data. Unfortunately, BLS creates a problem here. Its figures on inflation-adjusted wages for all private sector workers only go back to March, 2006. So they can reveal what’s happened to these wages since the current recovery began – in June, 2009. (They’re up in toto by 3.39 percent.) But they can’t tell us what happened in previous recoveries.

One way to address the problem is to use BLS’ figures for production and non-supervisory private sector workers. This is of course a different group than all workers, but the data here go back to 1964, and these “blue collar” Americans currently make up more than 82 percent of the entire private sector workforce. As a result, they’re pretty representative.

During the current recovery, price-adjusted wages for this large group of U.S. workers is up 3.85 percent – a faster rate than that for all workers. And it’s a much faster rate than for the previous, bubble-era recovery (which was only a little shorter). Then, real blue-collar wages inched up by only 0.35 percent. Wages during this expansion are up less than during its 1990s counterpart (6.64 percent), And that’s the case even factoring in their different durations. That “Clinton boom” lasted nearly ten years – about one and a half times longer than the current expansion. But real wages advanced by nearly twice as much.

During all these expansions, real blue-collar wages have performed better than during the so-called Reagan recovery of the 1980s. During that expansion, which like the current recovery also lasted about six and one half years, these wages actually fell by 1.86 percent. Even though the significant expansion preceding the Reagan recovery was much shorter – lasting from only March, 1975 to the end of 1979 – inflation-adjusted blue-collar wages sank even faster – 3.19 percent. Then, of course, inflation was at recent historic highs.

Therefore, the current recovery looks pretty good, real wage-wise. But there’s one other expansion we can examine – that during the 1960s. Data for the entire upswing, which ran from February, 1961 through November, 1969, isn’t available from BLS. But between January, 1964, when the numbers begin, through the expansion’s end, inflation-adjusted non-supervisory wages shot up by 8.58 percent. No wonder this period is seen as a Golden Age by many of those old enough to remember it firsthand.

Two other developments also take much of the shine off today’s wage growth. First, the current expansion is getting long in the tooth, and thus it’s unclear how much more inflation-adjusted wages will rise going forward. And second, despite the big real wage increases of the 1960s, America’s productivity was rising much faster than today as well. So “let the buyer beware” still seems like good advice for information consumers today when confronted with claims of worrisome wage inflation.

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Guest Posts

  • (What's Left of) Our Economy
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  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
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Current Thoughts on Trade

Terence P. Stewart

Protecting U.S. Workers

Marc to Market

So Much Nonsense Out There, So Little Time....

Alastair Winter

Chief Economist at Daniel Stewart & Co - Trying to make sense of Global Markets, Macroeconomics & Politics

Smaulgld

Real Estate + Economics + Gold + Silver

Reclaim the American Dream

So Much Nonsense Out There, So Little Time....

Mickey Kaus

Kausfiles

David Stockman's Contra Corner

Washington Decoded

So Much Nonsense Out There, So Little Time....

Upon Closer inspection

Keep America At Work

Sober Look

So Much Nonsense Out There, So Little Time....

Credit Writedowns

Finance, Economics and Markets

GubbmintCheese

So Much Nonsense Out There, So Little Time....

VoxEU.org: Recent Articles

So Much Nonsense Out There, So Little Time....

Michael Pettis' CHINA FINANCIAL MARKETS

New Economic Populist

So Much Nonsense Out There, So Little Time....

George Magnus

So Much Nonsense Out There, So Little Time....

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