(What’s Left of) Our Economy: May Sees First Manufacturing Jobs Drop in Six Months, but Wages Ride a Roller-Coaster

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

May’s monthly manufacturing employment drop of 1,000 ended the sector’s five-month string of sequential employment gains – its best such stretch since a near two year-long span between 2013 and 2015. Industry’s wages, though, roller-coastered for the second consecutive month, with May’s 0.45 percent pre-inflation drop (the worst) since last November’s 0.48 percent) following an upwardly revised jump of 0.76 percent in April (the best since October, 2008’s 0.81 percent, when the Great Recession was beginning).

Although manufacturing payrolls shrank in May, they still registered their biggest annual increase (63,000) since February, 2016 (69,000), and reversed the slight (2,000) decline between the previous two Mays. Yet these performances couldn’t change manufacturing’s status as a longer-term job-creation and wages laggard. Indeed, not only did its current dollar wages fall on month, but their annual increase was the slowest (1.86 percent) since July, 2014’s 1.57 percent. Further, the gap between the pre-inflation growth of industry’s paychecks and those of the private sector generally has been widening. March and April manufacturing employment revisions produced a net employment gain of 3,000.

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

>May brought an end to manufacturing’s best (five-month) sequential job gains string since 2013-2015, as payrolls dipped 1,000 below April’s levels.

>At the same time, industry’s pre-inflation wages seemed to climb aboard a roller-coaster. May’s 0.45 decline was the biggest since November, 2008’s 0.48 percent decrease. Bt it followed an upwardly revised April 0.76 percent jump – the biggest since October, 2008’s 0.81 percent – which was aided by many companies that perceived the start of the last recession cutting labor costs by laying off mainly less experienced, lower-paid workers.

>Even with May’s monthly employment drop, manufacturing’s year-on-year job gain of 63,000 was still the largest such number since February, 2016’s 69,000. More impressive, between the previous two Mays, manufacturing lost 2,000 jobs on net.

>Nonetheless, over the longer term, manufacturing has continued to lag the private sector overall on the payroll and paycheck fronts.

>During the current economic recovery, which began in mid-2009, manufacturing employment has grown by only 5.73 percent. For the private sector as a whole during the expansion, it’s up by 13.74 percent.

>Since the late-2007 onset of the last recession, manufacturing’s performance is equally poor. From that time to the early 2010 troughs, manufacturing lost 2.293 million jobs and private sector payrolls shrank by 8.801 million.

>Since then, manufacturing has regained just 41.21 percent of those lost jobs (a total of 945,000). The private sector as a whole has boosted employment by 16.574 million.

>As a result, total private sector employment is now 6.72 percent higher than at the recession’s late-2007 onset, but manufacturing employment is still 9.81 percent lower.

>Similar trends have played out in terms of both pre-inflation and after-inflation wages.

>Manufacturing’s 0.45 percent May monthly current dollar wage decline was considerably worse than the private sector’s 0.15 percent improvement.

>Year-on-year, manufacturing pre-inflation wages rose only 1.85 percent – not only much more sluggishly than the 3.46 percent increase between May, 2015 and May, 2016, but the weakest such rate since July, 2014 (1.57 percent).

>On a pre-inflation basis, manufacturing’s wage increases during the current economic recovery still trail those of the private sector, and the gap is widening. As of May, private sector pre-inflation wages were up by 18.43 percent during the expansion, versus a 14.99 percent increase for manufacturing wages. As a result, private sector wages had risen by 22.95 percent more over these nearly eight years than manufacturing wages.

>As of last May, however, recovery-era private sector wages were up by 15.58 percent, and manufacturing wages were up by 12.90 percent – resulting in a smaller, 20.76 percent, difference between the two.

>Adjusting wages for inflation produces a somewhat brighter picture for manufacturing. The latest figures are from April, and the sector’s after-inflation pay has been revised up from a 0.46 percent monthly gain to 0.55 percent – the best since August, 2015′ 0.66 percent. Real private sector wages in May, by contrast, has been revised down from a 0.09 monthly gain to flat.

>Year-on-year, real manufacturing wages have outperformed their private sector counterpart, too, advancing by 0.55 percent (much less, though, than the previous year’s 1.79 percent) versus 0.28 percent for the overall private sector (also much less than the previous annual increase of 1.42 percent).

>But during the current recovery, real manufacturing wages are up only 1.59 percent in toto. That’s less than half as fast as the overall private sector increase of 3.98 percent.

>Manufacturing’s March monthly job gain, which had been revised up from 11,000 to 13,000, has now been downgraded back down to 11,000. April’s previously reported 6,000 sequential employment increase has been revised up – also to 11,000.

(What’s Left of) Our Economy: Has Subsidized Private Sector Hiring Peaked (Relatively Speaking)?

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CNN.com, Employment, healthcare services, Jobs, Labor Department, non-farm jobs, private sector, real private sector, recession, recovery, subsidized private sector, The New York Times, {What's Left of) Our Economy

The Snob’s Manual tells us (often correctly) that you know when the stock market’s peaked when the retail investor rushes in, and that you know when a fad is passe when the mainstream media report it. Could the same maxim be on target for economic trends, like the outsized role played by the U.S. subsidized private sector in job creation during the recovery? I’m not sure yet, but the last few sets of monthly American employment data (including last Friday’s April figures) are certainly food for thought.

As RealityChek regulars know, I’ve been spotlighting this trend since well before RealityChek was born. And it was great to see the theme picked up last month by a major reporter who covers the healthcare sector (the core of that part of the economy dubbed private sector but in fact heavily dependent on government spending). Since then, healthcare hiring’s unusual recent robustness has been covered by The New York Times and CNN.com.

Here’s the rub: So far this year, subsidized private sector job creation has become less important in the overall employment picture, not more. The March and April statistics are still preliminary, but since January, the pace of subsidized private sector hiring has ranged between 7.87 percent of total monthly job creation (in January) to 29.31 percent (in February). The April figure was right in the middle: 19.43 percent.

The subsidized private sector’s waning momentum – at least relatively speaking – comes through more clearly when the first four months of this year are compared with their last few counterparts. From January through April, 2017, subsidized private sector net new job creation (which also includes social assistance agencies and the for-profit education sector) represented 18.43 percent of the non-farm total (the Labor Department’s definition of the American employment universe.

That share is considerably higher than the figure for the first two months of 2013 and 2014 (14.56 percent and 12.53 percent, respectively). But it’s also considerably lower than the 27.68 percent for 2015 and the 23.87 percent for the same time span in 2016. In addition, these numbers show that the subsidized private sector’s importance has not fallen for two straight years.

That’s not to say that the subsidized private sector isn’t still punching above its weight. Its 19.43 percent of net new job creation was still greater than its share of total employment on a standstill basis (15.75 percent). It’s also still higher than the share at the mid-2009 onset of the current recovery (14.97 percent). And it’s much higher than the share at the start of the last recession at the end of 2007 (13.22 percent). But there’s no doubt that this year it’s not punching quite as hard.

The flip side of the equation tells a similar, but not identical, story. The “real private sector” – where job creation is determined largely by market forces, not government decisions – stood at 68.95 percent of total non-farm jobs last month. That’s actually a little higher than its share at the start of the recovery (67.80 percent). But it’s also still a little lower than its share at the start of the last recession – more than nine years ago (70.62 percent).

There’s still a long way to go in figuring out whether these early 2017 results will hold up even through the end of this year, much less whether they represent hiring that’s peaking (again, relatively speaking) in the subsidized private sector. And of course a huge question mark is hanging over this entire chunk of the economy in the form of the healthcare debate. But the real implications are unchanged. Although subsidized private sector jobs serve many valuable purposes, the more the economy leans on them to generate employment and incomes, the less dynamic and productive the nation is bound to be.

Following Up: Healthcare’s Outsized Job Creation Reported in The New York Times

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Affordable Care Act, Chad Terhune, Employment, Following Up, healthcare, healthcare services, Jobs, Obamacare, private sector, productivity, subsidized private sector, The New York Times, Trump

Well this is pretty cool! A new New York Times op-ed piece has spotlighted a trend that RealityChek has long covered: how strongly the creation of healthcare services employment has dominated recent American job creation, and how this trend has been especially noteworthy since the financial crisis and Great Recession broke out nearly a decade ago.

At the same time, author Chad Terhune, who reports on the healthcare industry for Kaiser Health News and the California Health Care Foundation, explains a major dilemma being created by outsized healthcare job creation for the Trump administration: Because so many of the new jobs in the sector have been driven by the build-out of Obamacare, the president’ promise to abolish this vast new structure could endanger his broader promise to jump-start feeble U.S. economic growth and stagnating incomes.

Even worse, according to Terhune, any effort to make healthcare more affordable, or even keep it at its current affordability levels, will significantly weaken the healthcare job-creation engine.

As the author sees it, healthcare hiring got a major boost “as coverage expanded in 2014 under the [Affordable Care Act] and new federal dollars flowed in. The law gave hospitals, universities and companies even more reason to invest in new facilities and staff. Training programs sprang up to fill the growing job pool. Cities welcomed the development — and the revenue.”

Sharpening the healthcare jobs conundrum faced by the president: “rising health spending has been good for some economically distressed parts of the country, many of which voted for Mr. Trump last year.” And Terhune cites specific examples from West Virginia to Pennsylvania to Ohio and Missouri.

Just as important, the author convincingly shows that American healthcare’s success in creating employment – which clearly predates Obamacare’s passage – also largely explains its inefficiency. In Terhune’s words, because of the system’s

“redundancy, inefficiency and a growing number of jobs far removed from patient care….[l]abor accounts for more than half of the $3.4 trillion spent on American health care, and medical professionals like health aides and nurse practitioners are in high demand. But the sheer complexity of the system has also spawned jobs for legions of data-entry clerks, revenue-cycle analysts and medical billing coders who must decipher arcane rules to mine money from human ills.”

And although Terhune doesn’t make the point explicitly, this labor-intensivity means that the sector of the economy fueling so much of its output and hiring is pathetically unproductive. In other words, the more outsized growth and employment healthcare creates, the less able the entire economy will be to raise living standards on a sustainable basis.

Moreover, one big reason for this low productivity is a feature of the healthcare system – both under Obamacare and before it – not mentioned by Terhune, either, but that’s vital to recognize: As I’ve observed, although this gigantic industry is officially (and no doubt popularly) considered a part of the private sector, its scale owes largely to subsidies from the public sector, which is renowned for low productivity.

As always, RealityChek readers – and others – need to understand that placing healthcare (and similar industries, like the for-profit educational system and social assistance agencies) outside the “real private sector” is not the same as questioning its fundamental value. After all, no truly civilized society would ever reduce public policy to a quest for productivity to the exclusion of all other goals, whether economic or non-economic. Moreover, as some readers have alertly pointed out, the steady aging of the American population is bound to mean continued healthcare sector growth.

But Terhune’s article is a badly needed reminder that the economy’s heavy reliance on the current healthcare system’s employment power has major downsides. As its title indicates, it’s a “costly addiction,” and its price is bound to rise without a major overhaul of some kind.

Those Stubborn Facts: No American Exceptionalism in Employment

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Employment, Jobs, OECD, Organization for Economic Cooperation and Development

U.S. employment rate*, 4Q 2016: 69.5%

Rank among members of Organization for Economic Cooperation and Development (OECD): 15

OECD average: 67.2%

*share of working-age population holding jobs

(Source: “Short-Term Labour Market Statistics,” Labour Force Statisics, OECD.Stat, Organization for Economic Cooperation and Development, http://stats.oecd.org/Index.aspx?DataSetCode=STLABOUR)

(What’s Left of) Our Economy: Why the New Jobs Report May Really Matter

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Bureau of Labor Statistics, Employment, healthcare services, Jobs, non-farm jobs, real private sector, recession, recovery, subsidized private sector, {What's Left of) Our Economy

I have no idea how much credit President Trump deserves for the February U.S. jobs figures released last Friday that nearly everyone hailed as a strong performance. I feel somewhat more confident in noting that the results provided some preliminary indications – regardless of who or what deserves credit – that one of the most troubling features of the current employment recovery may have peaked.

Specifically, the February numbers show a reversal of the economy’s burgeoning reliance on what I call the subsidized private sector to generate employment gains, and a revival of the role played by the real private sector. That’s great news if these developments continue.

To summarize, the subsidized private sector consists of those American industries classified officially as private sector industries, but where levels of demand – and therefore employment – depend heavily on government subsidies. Healthcare services is the leading example. The real private sector is hardly devoid of government influence. But its levels of demand and employment are largely shaped by free market forces.

And since the real private sector leads the economy in innovation and productivity, signs that it’s regaining its relative job-creation chops deserve cheers.

I called the encouraging signs preliminary because they only cover the first two data months of this year. But they reveal that, in January and February, the subsidized private sector created only 17.55 percent of the 473,000 total net new jobs created by the economy. (Both numbers will be revised several times more.) That’s a much smaller share than the subsidized industries generated last January and February: 24.79 percent of the 363,000 net gain in employment.

The same conclusions flow from another set of data. During the first two data months of this year, the subsidized private sector accounted for 18.53 percent of the total employment improvement of the private sector as it’s conventionally defined by the Bureau of Labor Statistics. During the first two months of last year, that figure was 27.19 percent.

At the same time, the subsidized industries clearly are still punching above their weight on the employment front. In 2013, their two-month share of all net new jobs was only 13.48 percent, and of conventionally defined private sector jobs, 13.59 percent.

Looking at the economy on a standstill basis also reveals the importance of subsidized private sector job-creation. When the last recession began, at the end of 2007, it represented 13.22 percent of all non-farm payrolls (the Bureau of Labor Statistics’ U.S. jobs universe). When the current recovery began, in the middle of 2009, the subsidized private sector share had grown to 14.97 percent. And as of last month, despite the developments noted above, this percentage was up to 15.74 percent.

And this subsidized private sector growth has come in part at the expense of the real private sector. It’s share of total U.S. employment as of last month (68.94 percent) is still higher than at the recovery’s onset (67.80 percent). But it’s lower than its level at the onset of the last recession (70.62 percent).

Viewed from another perspective, when the current recovery began, as mentioned above, the subsidized private sector represented 14.97 percent of total American jobs. But since that time, it’s been responsible for 22.60 percent of total employment growth. The real private sector at the beginning of the current recovery accounted for 67.80 percent of total American jobs. And it’s share of subsequent employment growth has been higher, too (79.10 percent). But the gap between its share of employment and its role in employment growth is much lower than that of the subsidized industries.

Finally, the new jobs report contained some good news for fans of former President Obama. It revealed that from the start of the recovery that began a few months into his first term in office, through the end of his administration, hiring was slightly less subsidized private sector-heavy than originally reported.

There’s no doubt that two months’ worth of data per se hardly signal the dawn of a new, brighter era in American employment. At the same time, most trends don’t last forever. So in the months ahead, these subsidized private sector job trends will deserve more attention than ever. Indeed, they’ll be at least as important a yardstick for judging the Trump administration’s economic performance as the overall jobs totals.

(What’s Left of) Our Economy: The Real U.S. Private Sector’s Employment Role Keeps Shrinking and Shrinking

Tags

Bill Clinton, Employment, George W. Bush, healthcare services, Jobs, Labor Department, non-farm jobs, Obama, private sector, recoveries, subsidized private sector, {What's Left of) Our Economy

Because the latest monthly U.S. jobs figures that were released last Friday incorporated revisions going back to last March, our picture is clearer than ever of how dependent former President Obama’s job-creation record was on employment gains in what I call the economy’s subsidized private sector. Those are industries, notably healthcare service, where levels of demand (and therefore employment) are heavily reliant on government subsidies (and therefore politicians’ decisions) instead of on market forces.*

And unless you believe that government or parts of the economy it largely underwrites should be America’s job-creation leaders – which you shouldn’t – you’ll recognize that the more prominent that subsidized private sector is in the nation’s employment picture, the weaker the job market’s dynamics, and the U.S. economy’s genuine strength.

The verdict? These subsidized industries played a large, growing role in U.S. employment gains achieved during the economic expansion that began in June of Mr. Obama’s first year in office. At the same time, although the economy under Mr. Obama performed much better in this crucial respect than under his predecessor, George W. Bush, it fell short of the job-creation pattern under Mr. Bush’s predecessor, Bill Clinton.

The easiest way to show these trends is to focus on the share of total non-farm employment (the American jobs universe according to the U.S. Department of Labor, which officially tallies these numbers) accounted for by the subsidized private sector on a stand-still basis and the share of total job gains it represents. That methodology also yields the data on how employment in what might be called the “real private sector” is faring. And here are the numbers for the last administration:

 
Non-farm job change: +14.534m Percentage change: +11.09

Private sector job change: +14.833m Percentage change: +13.68

Subsidized private sector job change: +3.276m Percentage change: +16.70

Real private sector job change +11.557m Percentage change: +13.01

 

The following numbers show how strongly the subsidized private sector has influenced overall job creation under Mr. Obama:

 
Share of total non-farm job gains: 22.54 percent

Share of conventionally defined private sector job gains: 22.09 percent

 
As a result, the real private sector accounted for 80.51 percent of total non-farm job gains – a high but much smaller share than that resulting from failing to strip out the subsidized jobs (102.06 percent – the discrepancy comes from the absolute reduction in government jobs under President Obama).

Moreover, the subsidized private sector’s importance grew impressively during the Obama years. Between 2015 and 2016, it produced 24.44 percent of all non-farm jobs generated and 26.68 percent of all the employment improvement in the private sector as conventionally defined.

Nevertheless, if the subsidized private sector’s employment role grew robustly under President Obama, it positively skyrocketed during the Bush recovery of the 2000s compared with the rest of the economy. Let’s start by examining the job increases in the relevant major sectors of the economy from the end of 2001 to the end of 2007 – an expansion much shorter than that which began under President Obama:

 
Non-farm job change: +7.139m Percentage change +5.45

Private sector job change: +6.388m Percentage change +5.83

Subsidized private sector job change: +2.827m Percentage change +17.56

Real private sector job change +4.191m Percentage change +4.48

 
The contrast with the Obama years is even more striking when you specify the percent of jobs created for which the subsidized private sector was responsible. In the most important measures, both numbers are roughly twice as high:
Share of total non-farm job gains: 39.60 percent

Share of conventionally defined private sector job gains: 44.25 percent
As a result, the real private sector accounted for just 58.71 percent of total non-farm job gains under former President Bush – way smaller than the share than that resulting from failing to strip out the subsidized jobs (89.48 percent).

But the data leave little doubt that the best recent job-creation performance of recent presidents was turned in by Bill Clinton – with one caveat. Here are the figures for the economic expansion that began in April, 1991 (several months before his first inauguration) and February, 2001 (a month after he left office).

 

Non-farm job change: +24.412m Percentage change +22.53

Private sector job change: +21.991m Percentage change +24.47

Subsidized private sector job change: +4.109m Percentage change +35.84

Real private sector job change +17.882m Percentage change +22.80

 

In terms of the employment-generation role played by the subsidized private sector, here’s what these numbers show for the Clinton expansion:

 
Share of total non-farm job gains: 16.83 percent

Share of conventionally defined private sector job gains: 18.68 percent

 

The one blemish in the Clinton record is the very strong relative growth shown by the subsidized private sector both in absolute and percentage terms. Yet these developments didn’t move the overall job change numbers nearly as much as under Presidents Bush and Obama because they started from a considerably smaller base.

 
Finally, let’s examine how the subsidized and real private sectors’ share of total employment on a static basis has changed since the Clinton expansion began, with the beginning and end of that recovery and subsequent recoveries as our benchmarks:

 
Subsidized private sector as share of non-farm employment, start of Clinton recovery: 10.58 percent

Real private sector share: 72.36 percent

 

Subsidized private sector as share of non-farm employment, end of Clinton recovery: 11.73 percent

Real private sector share: 72.53 percent

 

Subsidized private sector as share of non-farm employment, start of Bush recovery: 12.29%

Real private sector share: 71.41 percent

 

Subsidized private sector as share of non-farm employment, end of Bush recovery: 13.67%

Real private sector share: 70.16 percent

 

Subsidized private sector as share of non-farm employment, start of Obama recovery: 14.97 percent

Real private sector share: 67.80 percent

 

Subsidized private sector as share of non-farm employment, latest Obama data: 15.73

Real private sector share: 68.97 percent

 
The best way to sum up these trends?  In my view, it’s realizing that, since the Clinton recovery began three and one half decades ago, the American economy has generated 37.188 million net new jobs. At that time, the subsidized private sector represented 10.58 percent of total employment.  Since then, it’s been responsible for 30.72 percent of the net new jobs created in the nation — punching way above its weight

The real private sector in April, 1991 accounted for 72.36 percent of the country’s total employment.  Since then, it’s produced 59.08 percent of net new jobs — punching well below its weight.  And finally, fully 52 percent of all the added employment created since April, 1991 that is officially classified as private sector has actually come in the subsidized private sector.

In other words, Presidents come and presidents go, and the economy expands and contracts. But for the last 35 or so years, the subsidized private sector has continued to grow in relative importance. Donald Trump is already considered to be the greatest disruptor in the presidency’s recent history. Is this trend, though, too powerful even for him to resist?

*As always, my definition of the subsidized private sector is not meant to be inclusive.  It simply includes three parts of the economy – healthcare services, the for-profit education sector, and social assistance agencies – that are broken out in the Labor Department data, and that therefore are easy to identify.  It should also encompass workers in sectors like defense-related manufacturing, but many of these are much more difficult to quantify.  

 

(What’s Left of) Our Economy: New Jobs Figures Show Deeply Mixed Obama Record on Manufacturing Employment

Tags

Employment, inflation-adjusted wages, Jobs, manufacturing, Obama, recession, recovery, wages, {What's Left of) Our Economy

January’s preliminary U.S. manufacturing jobs figures showed that former President Obama fell short of his stated goal of creating one million new positions in industry by 638,000. Since Mr. Obama’s first inauguration, moreover, manufacturing employment fell by 1.75 percent (220,000). But since the June, 2009 start of the current economic recovery, it rose by 5.24 percent (615,000). Since the sector’s February and March jobs bottoms, manufacturing employment has improved by 7.75 percent (888,000).

These new data, which incorporate benchmark revisions extending back to last March, also reveal that manufacturing’s latest jobs recession has continued, with employment down on net by 11,000 over the last 18 months. January’s modest 5,000 net sequential manufacturing jobs gain was more than offset by negative revisions back to October. January pre-inflation manufacturing wages increased on month but at a much slower rate (0.08 percent) than in December (0.46 percent). Since the current recovery began more than seven years ago, however, they’re up by only 14.51 percent – less than the overall private sector’s 17.43 percent.

The latest revisions also resulted in a new all-time low in January for manufacturing’s share of total non-farm employment – just under 8.48 percent. In addition, manufacturing’s annual 46,000 jobs loss in January was the biggest such drop since August, 2010 (73,000).

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

>Providing the first full tally of former President Obama’s manufacturing job creation record, this morning’s Labor Department employment figures showed that the previous administration saw industry’s employment rebound healthily from an historic recession, but that one of its key manufacturing employment objectives proved a major disappointment.

>Since Mr. Obama’s first inauguration, in January, 2009, manufacturing employment has fallen by 1.75 percent (220,000 jobs) on net.

>But the severe manufacturing output and jobs slump that began more than a year before the first Obama term began continued for months. Since the current overall economic recovery began, in June, 2009, manufacturing employment is up by 5.24 percent (615,000 jobs). And since domestic manufacturing hit its recent employment bottom – which didn’t come until February and March, 2010 – its payrolls have expanded by 7.75 percent (888,000).

>Nonetheless, President Obama fell far short of a goal he set during his 2012 reelection campaign – spurring the creation of an additional million net new domestic manufacturing jobs. Since his second, January, 2013 inauguration, U.S. industry added only 362,000 positions.

>In fact, the new employment figures show that manufacturing currently remains in a new jobs recession that began in July, 2015. Since then, manufacturing employment has dropped by 11,000 on net.

>Manufacturing’s efforts to regain jobs traction weren’t helped by the last three months’ performance. The sector did add 5,000 jobs sequentially in January. But December’s initially reported 17,000 monthly employment gain was revised down to an 11,000 increase. And October’s 4,000 monthly gain is now judged to be a 5,000 loss. Only partly offsetting these setbacks was the upgrade of November’s improvement from a 7,000 sequential job drop to no change.

>Although pre-inflation manufacturing wages advanced sequentially in January for the second straight month, the latest increase (0.08 percent) was much slower than in December (0.46 percent – wich in turn was downwardly revised from the initially reported 0.50 percent).

>The January monthly manufacturing wage hike lagged that of the private sector overall (0.12 percent) – reversing the December situation.

>Year-on-year, manufacturing wages rose by 2.93 percent in current dollars in January – considerably faster than the 2.37 percent gain recorded for the private sector as a whole. The latest annual manufacturing pre-inflation wage increase also bested the sector’s 2.52 percent advance between the previous two Januarys.

>But since the recovery’s mid-2009 onset, current-dollar manufacturing wages have risen by only 14.51 percent – significantly slower than the 17.43 percent increase for the overall private sector.

>Moreover, in real terms, however, the story for manufacturing is even more mixed.

>The latest Labor Department figures are from December, and show that manufacturing’s month-on-month performance (real wages rose by 0.18 percent) topped that of the overall private sector (where they flatlined).

>Year-on-year, though the new December 1.12 percent inflation-adjusted manufacturing wage improvement trailed that recorded from December, 2014 to December, 2015 (1.80 percent). The comparable overall private sector figures were not greatly different (0.75 percent and 1.82 percent respectively).

>But since the recovery began in mid-2009, manufacturing has remained a major real wage laggard, as inflation-adjusted hourly pay has risen a mere 1.12 percent – less than a third as fast as the 3.69 percent achieved in the private sector in general.

>The new benchmark revisions and the latest monthly figures resulted in a new all-time low (8.48 percent) for manufacturing’s share of total non-farm employment (the Labor Department’s U.S. employment universe).

>Year-on-year, manufacturing lost 46,000 net jobs in January. That’s the worst such performance since August, 2010 (a 73,000 falloff). Between the previous Januarys, manufacturing gained 88,000 net new jobs.

>Since its 2010 employment bottom, manufacturing has regained 888,000 (38.73 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 16.021 million.

>In fact, whereas total private sector employment is now 6.24 percent higher than at the recession’s beginning, in late 2007, manufacturing employment is still 10.22 percent lower.

(What’s Left of) Our Economy: So Productivity is the Main Manufacturing Jobs Killer?

Tags

Employment, Jobs, labor productivity, manufacturing, non-farm business, non-farm employment, productivity, Trade, Trump, {What's Left of) Our Economy

If you’ve been following the increasingly loud national debate on U.S. trade policy that’s been supercharged by President Trump’s election, you’ll be really surprised by the results of this morning’s latest report from the U.S. Labor Department on America’s labor productivity. And if you haven’t been following the debate, you should be – as both trade policy generally and the productivity angle are really important for the nation’s future prosperity.

The big surprise (which has actually been unfolding for years now): On the one hand, folks who support current trade policies (meaning nearly the entire political, business, and media establishments in this country) insist that the president is wrong to blame these policies for the steep manufacturing job drop the nation has experienced for so long. Instead, they argue, productivity growth is the real culprit – manufacturers are using technology and better management to produce more and more goods with fewer and fewer workers. (Do I really need to provide links?) And complaining about technological progress and managerial improvements makes little sense – at best.

On the other hand, labor productivity – a relatively narrow but still crucial measure of efficiency, which is widely regarded as the prime long-term driver of American living standards – has been growing ever slower for many years now, even as manufacturing employment has tanked. The relationship certainly doesn’t track exactly over the short-term. But long-term, it strongly indicates that something other than better productivity has hammered the manufacturing labor market.

For example, during the 1990s economic expansion, when manufacturing employment dipped by only 0.38 percent, manufacturing labor productivity rose by 46.78 percent. (We’re going to compare expansions because that method yields the best – i.e., apples-to-apples – data.) During the shorter 2000s expansion, many more manufacturing jobs were lost – 12.44 percent of the nation’s remaining total. But the sector’s labor productivity improved by only a little less – 41.08 percent.

During the current economic expansion, which is still more than two years shorter than its 1990s predecessor but nearly two years longer than the 2000s expansion, manufacturing employment has actually risen by 4.68 percent. But industry’s labor productivity is up by just 22.88 percent. That’s less than half the rate of the 1990s expansion, which saw hardly any manufacturing job loss.

As for the latest manufacturing labor productivity figures – during a period when manufacturing employment has resumed falling – they’ve been miserable. In the second quarter of last year, it fell sequentially by 0.50 percent on an annualized basis. In the third quarter, it inched back up 0.04 percent. Finally, as reported this morning, manufacturing productivity increased by 0.72 percent.

In the rest of the economy (technically the non-farm business sector, according to the Labor Department), labor productivity has risen faster over the short run. After declining sequentially by an annualized 0.15 percent in the second quarter of last year, it rebounded by 3.49 percent in the third. Even better, that number was revised significantly upward – from 3.03 percent.

Yet that third quarter jump could well be an anomaly. Today’s preliminary fourth quarter figure was down to a 1.29 percent annualized gain, and during the current economic recovery, overall labor productivity has advanced by only 7.96 percent. The comparable numbers for the previous two recoveries? 23.01 percent and 16.07 percent, respectively.

Nothing has been heard from President Trump about the productivity growth slowdown, but he has certainly expressed alarm about the state of domestic manufacturing – historically, the American economy’s productivity growth leader. Because productivity growth is so central to national economic success, he’ll need to focus even more intently and precisely on such issues if he wants his presidency to go down as an historical winner.

(What’s Left of) Our Economy: Obama’s Private Sector Jobs Recovery was Increasingly Government Driven

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Bureau of Labor Statistics, Employment, government spending, healthcare services, Jobs, Obama, real private sector, recovery, subsidies, subsidized private sector, {What's Left of) Our Economy

Last Friday, President Obama’s cheerleaders hailed that day’s December U.S. jobs report as proof positive that the outgoing administration has been a roaring success on the employment front. Central to their argument, according to Mr. Obama’s economic advisers themselves, has been the administration’s record in fostering private sector job gains.

In other words, the Obama camp has just given us the latest reminder that the way the government gathers and analyzes statistics can conceal at least as much as it reveals about economic trends. The main problem when it comes to such private sector jobs? As I’ve repeatedly noted, the Bureau of Labor Statistics’ definition of that portion of the economy includes enormous sectors – notably healthcare services – where levels of demand (and therefore employment) depend heavily on massive government subsidies.

And the December numbers – which provide the first take on Mr. Obama’s complete jobs performance (several revisions will be made in the months to come) – once again reveal that employment gains in what I call the “real private sector,” have been much less impressive. And that’s important because the real private sector is where the results depend largely on market forces. Therefore, they’re much better indicators of the American economy’s health than developments in industries strongly influenced by politicians’ decisions.

The December monthly figures were stellar for the subsidized private sector. It generated 70,000 of the 156,000 net new jobs (nearly 45 percent) created that month, and nearly half of the 144,000 employment improvement in the private sector as it’s conventionally defined.

These figures were unusually high. But they continue a trend that becomes clearer when looking further back into the current recovery (which pretty much coincides with President Obama’s term in office).

For 2016, as a whole, the subsidized private sector was responsible for 592,000 of the 2.157 million jobs added on a net basis – or 27.45 percent. The real private sector, meanwhile, contributed just over 64 percent of the new employment. (Government took care of the balance.)

Three years ago, the comparable numbers were 14.92 percent of total new non-farm jobs on net for the subsidized private sector and 87.23 percent of such employment for the conventionally defined private sector.

In other words, the subsidized private sector’s share of new American job creation nearly doubled, while the real private sector’s share fell by more than 26.55 percent.

From another perspective, over the last three years, the subsidized private sector’s share of the conventionally defined private sector has more than doubled – from 14.60 percent to a shade under 30 percent.

Incidentally, it’s critical to keep in mind that, if anything, these data greatly understate the importance and growth of the subsidized private sector. For they count only those subsidized private sector jobs that can be easily identified in the official monthly job reports. Digging deeper into these data would reveal many more such positions – for example, in medical-related manufacturing. And another large group of subsidized private sector workers is much more difficult to quantify – those engaged in defense-related manufacturing and service provision.

Finally, don’t mistake this effort to distinguish the subsidized from the real private sector as an effort to brand the former as “bad” by definition and the latter as similarly “good.” Any number of subsidized private sector jobs perform worthy and often vital work. Moreover, even most conservatives haven’t yet figured out a viable way to eliminate government from healthcare.

And when it comes to healthcare, don’t forget that its strong employment growth, and indeed dominance of subsidized private sector payrolls in part reflects the aging of the American population and its consequently greater medical needs.

Instead, view this analysis as an exercise in greater precision and recognizing change. Good luck running an economy successfully without them.

(What’s Left of) Our Economy: More Signs that the Jobs Recovery is Reversing

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cities, Employment, Jobs, Labor Department, recovery, unemployment rate, {What's Left of) Our Economy

As the 2016 presidential election rapidly approaches, broad consensus seems to exist that the U.S. economy has done a good job creating more employment as the current recovery has proceeded, but that progress has been notably uneven. New figures from the Labor Department confirm the latter belief, but continue posing a challenge to the former.

Each month, Labor issues numbers on how many American metropolitan areas have seen their jobless rates go up on an annual basis, how many have seen them fall, and where the situation is unchanged. A few months ago, I reported that the number of these city and suburb combinations with falling jobless rates looked to be shrinking considerably, and the number where unemployment was rising was growing. Today’s statistics from Labor (for August) show that the situation has worsened further.

That month, jobless rates rose year-on-year for 123 of the 387 metro areas tracked, and fell for 242. The jobs picture was unchanged in 23. That’s a noteworthy deterioration from the statistics I last examined, for April. Then, unemployment rates rose year-on-year in 94 of the 387 metro areas, fell in 296, and stayed the same in 24.

In fact, the August numbers are the worst proportionately since January, 2013. Then, jobless rates rose in 124 of the 372 metro areas Labor was tracking at the time – or 33.33 percent. This past August, the 123 jobs laggards represented 31.78 percent of the 387 areas currently monitored.

It’s still possible that these August numbers are outliers. The May and June numbers, after all, were more comforting. (I couldn’t find the July figures.) But think about how long the current recovery has lasted (more than seven years). Then think about how low overall national unemployment has fallen. (It peaked at 10 percent in October, 2009 and stood at just 4.9 percent in August, the last data month we have,) That’s why it’s getting tough to imagine realistically that the number of American urban areas with rising jobless rates won’t keep rising itself.

And for you RealityChek regulars, I’m still waiting for those furshlugginer final presidential debate TV ratings!