(What’s Left of) Our Economy: U.S. Manufacturing’s Jobs Recovery Continues Strongly

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automotive, CCP Virus, coronavirus, COVID 19, exports, Jobs, manufacturing, NFP, non-farm jobs, non-farm payrolls, private sector, services, Trade, Wuhan virus, {What's Left of) Our Economy

The big question raised by today’s second straight expectations-clobbering official monthly U.S. jobs report (for June) is whether the surge in recovered employment can withstand whatever second CCP Virus wave of infections, or resurgence of the first wave, numerous states have been seeing lately.

I can’t answer that knowledgeably – and I suspect few others can, either. What I can do is note that the June numbers roughly repeat or confirm some of the patterns visible for May. Mainly, manufacturing held up better than the rest of the American jobs market, and within manufacturing, the swings have been dominated by the automotive sector.

Domestic industry added a net 356,000 workers to its payrolls in June, and revisions for the last two months – as with non-farm jobs as a whole (the U.S. government’s jobs universe) – were slightly positive (virtually unchanged at a 1.32 million net loss for April, upgraded from a 225,000 to a 250,000 net gain in May).

Fully 55 percent (195,800) of those 356,000 new June manufacturing jobs came in the automotive sector – a rubber band-like comeback surely reflecting the outsized hit this industry has taken since the CCP Virus threw the entire economy into a deep downturn. Even with this improvement, since February, combined vehicle and parts employment is down more than twice as much relatively speaking (12.11 percent) as overall manufacturing employment (5.89 percent).

Further, overall manufacturing’s record of pandemic-era resilience continued in June. Its monthly jobs growth was only 3.03 percent – slower than the rate for the total non-farm sector (3.61 percent) and the private sector (4.27 percent).

But a main reason is that manufacturing has taken a much smaller CCP Virus hit than the rest of the economy. That 5.89 percent employment loss since February has been considerably less than that of the non-farm sector (9.62 percent) or the private sector (10.17 percent).

Manufacturing employment could face some intriguing crosswinds in the months ahead. A second virus wave or a re-strengthening first wave may well slow its jobs rebound going forward, since U.S.-based industry sells so much to those domestic service industries that have borne the brunt of the pandemic-created economic damage. At the same time, domestic manufacturers were selling just under 18 percent of their gross output overseas as of the end of last year, so if recoveries quicken overseas, U.S.-based manufacturers and their workers could benefit significantly.

In this vein, one possibly hopeful sign is that as of May, according to this morning’s monthly U.S. trade report from the Census Bureau, manufacturing exports are down a whopping 15.74 percent year-to-date. And they fell 5.28 percent in May alone. Therefore, precisely because the “comps” have been so lousy, domestic manufacturers could experience something of a rubber-band-like bounceback of their own – at least in the near-term future.

(What’s Left of) Our Economy: A Rosier May U.S. Jobs Picture – Including for Manufacturing

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CCP Virus, coronavirus, COVID 19, Jobs, Labor Department, manufacturing, nonfarm jobs, private sector, reopening, Wuhan virus, {What's Left of) Our Economy

As of this morning’s stunning U.S. employment report from the Labor Department (for May), it looks like I’m wrong on the strength and speed of the recovery from the nation’s CCP Virus-induced recession. And I couldn’t be happier. (See here for my most recent forecast.)

What’s also critically important to note is that the announcement that the economy last month created a net new 2.51 million jobs over April’s levels seems to belie warnings that reopening the economy sooner rather than later would bring disastrous public health consequences – even with considerable social distancing, mask-wearing, and other protective measures. But the economic shutdowns began to be lifted in late April, and here it is early June, and no new spikes in virus infections, hospitalizations, and deaths have been recorded.

Further, strong reasons can be cited for believing that payrolls improvement will continue, at least until the arrival of a notable second wave, assuming one’s coming. For as usual, the May jobs report is based on the mid-month situation. One possible cause for concern, though: The response rates of the businesses and households surveyed remain lower than they were before the pandemic struck. So it’s possible that considerable economic distress is being missed.by the Labor Department’s canvassers.

All the same, let’s not pretend that the employment picture is anywhere close to good or even acceptable. The unemployment rate remains at an horrendous 13.3 percent, and non-farm payrolls (the Labor Department’s definition of the U.S. jobs universe) are still down by fully 17.67 million year-on-year.

Moreover, the new upswing is starting from a lower baseline than originally reported, for March net jobs losses are now pegged at 1.37 million, not the 701,000 first estimated, and April’s decrease has been revised from 20.50 million to 20.69 million.

Just for comparison’s sake, job losses during the Great Recession that followed the 2007-08 financial crisis totaled 8.69 million (from December, 2007 through February, 2010). And pre-recession employment levels weren’t regained until May, 2014. The very speed and strength of the latest jobs nosedive could mean that the employment recovery will be notably faster – as perhaps indicated by this morning’s data. But there’s also much more ground to be made up.

Interestingly, the CCP Virus impact on manufacturing remains smaller than on the rest of the economy. True, on a percentage basis, industry’s month-to-month jobs comeback (225,000 in absolute terms) was less on a percentage basis (1.96 percent) than that of the private sector overall (2.86 percent) – although slighly higher than that of the total economy (1.92 percent, a figure that of course includes hard-hit state and local governments).

But that’s partly because the manufacturing payrolls slump has been somewhat milder. The sector’s March employment losses have been upwardly revised from an originally reported 18,000 to 46,000. But last month’s initial April estimate of a 1.33 million jobs decline is now judged to be a slightly better 1.32 million.

Since February, therefore, whereas the total economy has shed 12.82 percent of its payrolls and the private sector 13.87 percent, manufacturing employment is off by 9.78 percent.

Let’s not be pollyannish, though. From its pre-Great Recession level to the trough, manufacturing lost 2.293 million jobs. And even at their peak during the pre-virus recovery (last December), only 61.71 percent had been regained.

That is, thanks to the CCP Virus, both the U.S. economy overall and its manufacturing sector remain awfully sick on the employment front.

(What’s Left of) Our Economy: Picking Through the April Jobs Wreckage Details

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Employment, Great Depression, Great Recession, Jobs, Labor Department, manufacturing, NFP, non-farm jobs, non-farm payrolls, private sector, unemployment, {What's Left of) Our Economy

Today’s U.S. jobs report from the Labor Department (for April) is the first that makes fully (so far) clear the historic American employment disaster created by a combination of the CCP Virus and widespread economic shutdown and lockdown orders.

As widely observed already, the 14.9 percent national unemployment rate for the month is the highest suffered since the Great Depression of the 1930s. During this slump, (which, it can never be forgotten, helped pave the way for World War II), the annual jobless rate peaked in 1933 at 24.9 percent. Moreover, as always with these monthly jobs releases, the data only cover mid-month. So the May report will almost surely bring considerably worse new April revisions, just as the April report showed sharp downward revisions for March and even February.

Worse, as the Labor Department employment trackers observed, in April they were able to reach only about 70 percent of the number of households they tried contacting in their standard efforts to calculate that unemployment rate. They pre-virus response rate was 83 percent. And although it’s entirely possible that this weak response rate has overestimated unemployment, it could be producing an underestimate, too.

That big uncertainty aside, the revisions are a good place to start highlighting how the details of today’s numbers underscore what an unprecedented shock the economy is absorbing.

Principally, that March total plunge in non-farm payrolls (NFP, the Labor Department’s U.S. jobs universe) was first reported at 701,000 – a figure that was (sadly) exceeded four times during the Great Recession that followed the 2008-09 financial crisis. Now these March losses are pegged at 870,000 – much higher than the Great Recession peak of 784,000 in January, 2009. April, of course, has blown away such comparisons, as NFP plummeted by 20.50 million. Indeed, that’s the largest monthly decrease in absolute terms in the history of these Labor Department data, which go back to 1939.

As a result, U.S. employment levels are back to where they were in February, 2011 – meaning that more than nine years of jobs gains have just gone up in smoke.

In fact, those 20.500 million net jobs destroyed in April alone (again, this is a preliminary number, which will be re-estimated twice more in the next two months, and then again when Labor issues the next of its standard multi-year revisions) represent more than twice as much employment loss as that experienced during the entire Great Recession (whose jobs dimension lasted from December, 2007 until March, 2010) – 8.698 million.

As for the private sector, the initially reported March jobs collapse of 713,000 was topped five times during the Great Recession. But this morning’s new March jobs wipeout figure of 812,000 now matches that recession’s worst (hit in April, 2009). Tragically, the new April private sector job loss figure of 19.520 million makes even those dreadful numbers look positively quaint.

Oddly, even though its April monthly job loss was 1.33 million, manufacturing has continued to hold up relatively well so far during the CCP Virus crisis. Industry’s March payroll decline was revised down from 18,000 to 34,000. And the April figure was much worse than manufacturing’s worst month during the Great Recession (289,000, recorded for January, 2009). Moreover, the 1.330 million April manufacturing employment nosedive was more than half of the total manufacturing job decrease during the entire Great Recession (2.293 million).

All the same, since February, whereas total U.S. job totals are off by 14.02 percent since February, and private sector employment has fallen by 15.70 percent, manufacturing’s drop has been 11.87 percent.

Once more, this relatively bright picture could change either with next month’s NFP report, or relatively quickly thereafter, as the economy reopens. But it’s also important to keep in mind that the pre-Great Recession total U.S. employment peak of 138.392 million in December, 2007 wasn’t matched again until May, 2014. It took until March, 2014 for the private sector to regain its pre-recession employment peak of 116.060 million. And manufacturing has never regained its pre-recession level of 13.746 million – which itself was far from a peak, because its payrolls had been decreasing for decades. The best it did was to regain 1.413 million (61.62 percent) of the 2.293 million jobs lost during the Great Recession. This level was hit just last December.

And all these recoveries were reasonably “V-shaped” (that is rapid), by historical standards. Unfortunately, “V” seems to be a letter going out of style as economists struggle to figure out what the post-CCP Virus recovery will look like.

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

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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: Newest Numbers Show Trump’s Real Wages Problem Continues

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Barack Obama, election 2020, inflation adjusted wages, manufacturing, private sector, real wages, Trump, wages, {What's Left of) Our Economy

The big economic message sent by today’s official U.S. data on inflation-adjusted wages is highly concentrated in the so-called benchmark revisions – which adjust the results going back to 2015. And the big political message sent by these revisions is that President Trump’s economic record still suffers from a serious real wage problem – especially in the manufacturing sector, and especially compared with his predecessor, Barack Obama, whose supposed economic failures Mr. Trump has made a major campaign issue.

To be sure, the newest (and unrevised) January statistics weren’t great news for Trump-World, either. Total private sector pay in real terms inched up only 0.09 percent month-to-month, and the annual increase was a mere 0.64 percent. Between the previous Januarys, constant dollar private sector wages improved by a much faster 1.77 percent. (The Labor Department doesn’t track public sector wages, because their levels and growth are determined overwhelmingly by government decisions, and therefore supposedly say little about the state of the labor market or of the entire economy.)

The story for blue-collar workers (called “production and nonsupervisory workers” by the Labor Department and abbreviated here “N/S”) was only a little better. Their real wages flat-lined on month in January, but year-on-year they were up 0.75 percent – more strongly than overall private sector wages, and thereby in synch with numerous observations that pay at the lower end of the scale is rising faster than it is at the upper end.

In manufacturing, however, that picture is more mixed. Overall after-inflation manufacturing wages dipped by -0.09 percent sequentially in January, though they advanced by 0.74 percent year-on-year. That rise was better not only than that of total private sector workers, but than of its own performance the previous year – which saw zero increase in these wages.

Price-adjusted wages for manufacturing’s blue collar workforce, however, fared only negligibly better than for all manufacturing employees – flat-lining versus a small decline. And year-on-year they increased by less than a third the rate of pay for all manufacturing workers (0.23 percent) and much more slowly than the year before (1.37 percent).

The good news for Mr. Trump – the revisions put more of a shine on his job creation record over the last two years, as shown in the tables below. (Keep in mind that they only take the story through December, 2019 – because today’s January figures haven’t been revised yet.)

                                                                     Unrevised

                                     Total private     N/S private     Total mfg      N/S mfg

Year-on-year, 2019:         +0.64%           +0.75%          +0.74%        +0.45%

Year-on-year, 2018:         +0.56%          +1.63%                0%          +1.14%

                                                                      Revised

                                    Total private      N/S private     Total mfg      N/S mfg

Year-on-year, 2019:        +0.73%           +0.85%           +0.74%        +0.45%

Year-on-year, 2018:        +1.40%          +1.74%                 0%          +1.03%

Interestingly, though, the biggest changes came for all private sector workers. And the updates make the picture for blue-collar manufacturing workers slightly gloomier.

But the revisions still left the Obama years’ real wages performance looking better than those of the Trump years – a comparison that might be raised frequently during this election year. The 34-month periods have been chosen because that’s the amount of time Mr. Trump has been in office since his first full month in the White House (February, 2017. Further, the two time periods are right next to each other in the current business cycle.

The bottom line? The gap between the two administrations closed for all private sector workers and blue collar private sector workers. But it widened in the manufacturing sector.

                                                                Unrevised

                                  Total private      N/S private      Total mfg    N/S mfg

1^st 34 Trump months:    +2.53%           +2.72%          +0.65%       +2.77%

last 34 Obama months: +3.50%           +3.97%          +3.05%       +2.97%

                                                                  Revised

                                  Total private      N/S private      Total mfg    N/S mfg

1^st 34 Trump months:    +2.71%            +3.05%          +0.65%      +2.65%

last 34 Obama months: +3.49%            +3.97%          +3.44%      +3.34%

And finally, the impact of the revisions on real wages trends during the current economic recovery, and on the previous two expansions:

                                                                                 Unrevised

                                                             Private    N/S private    Mfg      N/S mfg

1990s expansion (2Q 91-1Q 01):           n/a          +6.37%        n/a       +2.18%

bubble expansion (4Q 01-4Q 07)         : n/a          +0.35%        n/a       -2.77%

current expansion (2Q 09 – present): +6.30%      +6.79%    +1.59%   +3.01%

                                                                                 Revised                      

                                                              Private   N/S private    Mfg      N/S mfg

1990s expansion (2Q 91-1Q 01):            n/a          +6.51%       n/a        +1.81%

bubble expansion (4Q 01-4Q 07):           n/a         +0.35%        n/a        -2.77%

current expansion (2Q 09 – present):  +6.70%     +7.01% +   1.59%    +2.77%

The big takeaways, as I see them: The real wage performance of the current recovery looks somewhat better than previous thought – except for blue-collar manufacturing paychecks. And the widely admired 1990s expansion looks better for blue-collar private sector workers in toto but worse for their manufacturing counterparts.

Several recent polls show Americans to be unusually happy about the state of the economy and their own personal situations. (For the latest, see here.) These real wage figures indicate that it’s not yet entirely clear why.

(What’s Left of) Our Economy: U.S. After-Inflation Wages Could Still Use More Inflation

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Barack Obama, election 2020, inflation-adjusted wages, manufacturing, private sector, real wages, recovery, Trump, wages, {What's Left of) Our Economy

This morning’s real wages figures from the Labor Department (for December) contained an unusually diverse grab bag of results, and with a presidential election year now officially underway, perhaps the most newsworthy are those that could well affect the race for the White House – and which on balance seem unfavorable to President Trump.

In addition, though, some other results undermine a major belief about how after-inflation paychecks have fared during the current (record length) economic recovery versus its two immediate predecessors.

Not that the news was all bad for the President and his supporters (and anyone else rooting for a stronger American economy). Yes, overall, inflation-adjusted wages in the private sector dipped sequentially for the second time in three months – by 0.09 percent. (The Labor Department doesn’t track real public sector wages because their trends say more about politicians’ decisions than about economic fundamentals).

But if these preliminary figures hold tightly enough, the 2019 year-on-year improvement of 0.64 percent will be higher than 2018’s 0.56 percent increase.

At the same time, wage growth decelerated throughout 2019 – from 0.37 percent between January and June to 0.27 percent between June and December.

Real manufacturing wages fared better, continuing a year-long trend. Month-to-month in December they climbed by 0.18 percent, and their year-on-year increase and improvement were stronger than that of the private sector, too. The latest annual rise was 0.74 percent – up from the previous year’s flatline. And throughout 2019, they increased at the same 0.37 percent rates during both halves of the year.

But the results were less encouraging for non-supervisory workers in both the private sector overall and in manufacturing. By certain measures, paychecks for the lowest paid U.S. workers have been improving faster than those for the workforce overall. And using the Labor Department’s methodology of distinguishing supervisory from non-supervisory workers provides some support for that finding.

For example, on an annual basis, in 2019 and 2018, inflation-adjusted wages increased faster for both non-supervisory manufacturing and blue-collar workers than those wages for all workers, as shown here:

                                     Total private     N/S private     Total mfg      N/S mfg

Year-on-year, 2019:         +0.64%           +0.75%          +0.74%        +0.45%

Year-on-year, 2018:        +0.56%           +1.63%                0%          +1.14%

Yet the table also shows 2018-19 deceleration for both groups.

Moreover, on month in December, real wages for these blue-collar workers performed worse in absolute terms than for all private sector and manufacturing workers – actually falling by 0.21 percent for the former (the biggest decline since October, 2018’s 0.22 percent drop) and increasing by just 0.11 percent for the latter.

And deceleration continued through the year. Between the first and second halves of 2019, constant dollar wages increases for the private sector fell from 0.53 percent to 0.21 percent, and from 0.23 percent to 0.22 percent for manufacturing.

The impact of Boeing’s safety-related woes on aircraft manufacturing per se and on the company’s huge domestic supply chain could explain some of these disappointing figures for industry. But so could the uncertainties created either by Mr. Trump’s tariff-centric trade policies, or by their ragged implementation, or both. Further, as the numbers indicate, real wage weakness isn’t simply a manufacturing problem.

Perhaps most important for Mr. Trump, real wages’ performance during the first 34 months of his term in office (starting with February, 2017, his first full month), have lagged their increases during the most comparable period in Barack Obama’s presidency – his last 34 months in office (ending in January, 2017). Here are the results:

                                       Total private      N/S private      Total mfg        N/S mfg

1^st 34 Trump months:         +2.53%           +2.72%           +0.65%          +2.77%

last 34 Obama months:      +3.50%           +3.97%          +3.05%           +2.97%

Finally, the new real wages data show that when it comes to this gauge, the current economic recovery stacks up unexpectedly well with the two previous expansions where a reasonable amount of statistics exist – for non-supervisory workers. The comparison is especially striking between the current expansion and the 1990s expansion – which is widely viewed as an excellent one for both the economy and America’s employees.

                                                               Private    N/S private    mfg     N/S mfg

1990s expansion (2Q 91-1Q 01):             n/a           +6.37%       n/a      +2.18%

bubble expansion (4Q 01-4Q 07):           n/a            +0.35%       n/a      -2.77%

current expansion (2Q 09 – present):  +6.30%        +6.79%   +1.59%   +3.01%

Unfortunately for President Trump and Trump-ers, though, this longer-term picture isn’t likely to impress voters as much as more recent developments. And when it comes to workers’ after-inflation wages, he clearly has more work to do.

(What’s Left of) Our Economy): The Real Private Sector’s Job Creation is Lagging Again

Tags

Employment, healthcare services, Jobs, private sector, real private sector, subsidized private sector, Trump, {What's Left of) Our Economy

Although President Trump may not like America’s current healthcare system much, lately it’s been keeping his own economic record in solid shape – not to mention and bolstering his reelection chances. The evidence? Robust employment creation in the nation’s enormous healthcare services sector this year has been almost singlehandedly responsible for keeping job growth in the respectable range, and for strengthening the case that he’s steered the economy ably.

Unfortunately, the big 2019 relative rebound in payrolls in healthcare services and the rest of what I’ve long called the subsidized private sector is less good news for the economy itself. For the huge scale of these positions says much more about the government largesse on which their existence depends than about the state of the nation’s economic fundamentals – the market forces that drive employment in what can be called the economy’s real private sector, and that are supposed to be the keys to long-term national prosperity.

In fact, the figures for 2019 – which now cover its first eleven months – show that whereas the subsidized private sector’s profile in the U.S. labor market had been receding during the first two years of the Trump administration, this year it returned to levels not seen since the early days of the current (record-length) economic recovery. And consequently, the real private sector’s performance has revealed new weakness.

Specifically, from January-through-November 2011 (when the economy settled into normal expansion mode after the typically strong short-term bounceback from an unusually deep recession) through the comparable 2016 period, the subsidized private sector’s share of total gains in “nonfarm employment” (the U.S. Labor Department’s definition of the American jobs universe) grew from 19.35 percent to 25.87 percent. And its share of employment increases in the total, conventionally defined private sector itself, increased from 16.71 percent in 2011 to 36.88 percent in 2016.

By Mr. Trump’s second year in office, healthcare services and other subsidized private sector employment had sunk to 18.96 percent of total nonfarm job creation and 24.55 percent of total private sector job creation.

But what a difference a year has made! For the first eleven months of 2019, fully 30.96 percent of all U.S. jobs created have come in the subsidized private sector, and these industries accounted for more than half (50.75 percent) of private sector job creation. The former figure was the economy’s highest since 2010 (when it hit 32.78 percent), and the latter’s the highest since 2016 (when it hit 58.43 percent).

The Trump record isn’t entirely discouraging if you’re a fan of real private sector job creation – and you should be if you believe (as you should) that the predominance of market forces represents the economy’s best hope for sustainable prosperity. For the pace of public sector hiring has definitely waned over the last three years – and not only in relative terms. During the final three January-through-November periods of the Obama administration, government was adding an annual average of 140,000 jobs. During the first three such periods under Mr. Trump, the annual average is down to 110,000 (though it’s been on the upswing since 2017).

Yet if levels of government spending are the driving forces in both cases, is the relationship between the public sector and the subsidized private sector a distinction without a difference?

(What’s Left of) Our Economy: Trump’s Real Wage Record Still Needs More Work

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Barack Obama, inflation adjusted wages, Labor Department, manufacturing, private sector, Trump, wages, {What's Left of) Our Economy

The new after-inflation wage figures released this morning by the Labor Department (that bring the story, preliminarily, through November) show that workers’ price-adjusted take home pay remains a feature of President Trump’s economic record that still needs work.

This conclusion comes through loud and clear from the table below. It shows the real hourly wages changes over various periods of time for all private sector workers (Labor doesn’t track public sector wages, since they’re largely set by politicians’ decisions, and therefore say little about the underlying state of the economy), for private sector “production and nonsupervisory” workers (let’s call them “blue-collar” for short) and for all manufacturing and blue-collar manufacturing workers.

                                                                           All workers      Blue-collar workers

November m/m private:                                      0 percent           +0.11 percent

November m/m manufacturing:                      +0.09 percent           0 percent

November y/y private:                                   +1.11 percent         +1.72 percent

November y/y manufacturing:                       +1.02 percent        +1.81 percent

private 1^st 33 Trump months:                         +2.62 percent        +3.16 percent

manufacturing 1^st 33 Trump months:             +0.46 percent        +2.54 percent

private last 33 Obama months:                      +3.69 percent        +4.07 percent

manufacturing last 33 Obama months:          +3.35 percent       +3.46 percent

private since current recovery onset:             +6.40 percent       +7.24 percent

manufacturing since recovery onset:             +1.40 percent       +2.77 percent

The short-term trends look pretty good. In particular, the difference between the latest annual increase in constant dollar private sector wages (1.11 percent) and the increase during the first 33 months of the Trump administration (2.62 percent) makes clear that the last year has a greater average monthly rate of improvement (0.93 percent) than the entire period (0.79 percent). Therefore, there’s been a modest acceleration in real wage increases. (I consider February, 2017 the current administration’s start month, since President Trump was inaugurated on January 20.)

The picture has been even brighter for blue-collar workers, with the average monthly rates of increase standing at 1.56 percent over the last year and (0.96 percent) for Mr. Trump’s entire term in office.

Price-adjusted manufacturing wages have grown slower so far during this Trump term than private sector wages, but acceleration is evident here, too. In fact, it’s been even faster. For all manufacturing workers, after-inflation wages have risen over the past year by an average of 0.85 percent per month. Since Mr. Trump’s inauguration, though, this rate has been only 0.14 percent.

And although also at lower absolute levels of increase, the wage increase pickup has been greater for manufacturing’s blue-collar workers as well – an average monthly gain of 1.51 percent over the last year versus one of only 0.77 percent for the President’s entire tenure.

So what’s the problem? It’s that this wage performance for all categories of workers pales before that from the best comparable Obama administration period – its final 33 months. And the biggest gap has been in manufacturing, for both the total and blue-collar workforces.

It’s entirely possible, as I’ve noted, that the worse record during the Trump years could be due to employers of all kinds, including manufacturing, being forced during a time of super-low joblessness to start hiring workers they’d have never considered before – because they’d likely be so unproductive, at least at first. It’s also entirely possible that this development will yield big long-term benefits for the entire economy. And if it’s true, this thesis would be terrific news for those new workers at first.

But such fine points are even more likely to be ignored or downplayed during an election year than they are normally. Which means that without major progress in the months ahead, Mr. Trump had better hope that his Democratic rivals ignore the details of the wage figures as thoroughly as the media typically do.

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

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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 1^st (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 1^st (metals) tariffs: 33.8 to 33.6

Total manufacturing weekly hours since Trump inauguration: 40.7 to 40.5

Total manufacturing weekly hours since 1^st (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 1^st (metals) tariffs: 42.4 to 41.5

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

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

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

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

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

Total manufacturing real hourly wage since 1^st (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 1^st (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: The Trade Wars’ Bite on Manufacturing Jobs Looks Deeper

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2020 elections, aluminum, China, Jobs, Labor Department, manufacturing, metals tariffs, metals-using industries, private sector, steel, tariffs, Trade, trade war, wages, {What's Left of) Our Economy

Today’s U.S. jobs report (for September) contained much better news for President Trump and his supporters in terms of the economy’s overall performance than it did in terms of his trade policies. American employment on net rose by a decent 136,000 sequentially last month, and the revisions (which boosted the July and August numbers by a total of 45,000) were especially encouraging.

But payrolls in domestic manufacturing – a sector heavily exposed to trade – shrank month-to-month by 2,000. That decline was the first such dip since March’s 3,000. And despite the big positive revisions in overall employment, manufacturing’s left its modest recent hiring record virtually unchanged.

Worse for the President, manufacturing’s metals-using industries in September continued their worrisome recent transition from employment out-performers for the first half year or so after the first duties on steel and aluminum were levied to employment laggards.

Moreover, although manufacturing employment does face two obstacles having nothing to do with the Mr. Trump’s trade wars – Boeing’s safety woes and the strike that began last month against General Motors – damage from the former isn’t yet evident in the jobs data, and the latter probably began too recently to be showing up in the numbers yet.

The impact of the much broader China tariffs remained as elusive as ever, largely because of the on-again, off-again nature of the President’s policies, along with changes and threatened changes in tariff rates on so many goods. But even if Mr. Trump was a model of consistency on this score, the China levies’ effects would be fiendishly difficult to gauge because manufacturing inputs from China are used so broadly but so unevenly by domestic manufacturers.

By contrast, the trends for the metals-using industries look clear enough. This time, I’ll present not only their employment changes since April, 2018 (the first full month in which the metals levies were in effect) and September, but the same employment changes for an earlier post-tariff period. First, the latest numbers:

                                                   Old thru Aug     New thru Aug      Thru Sept

entire private sector:                  +2.30 percent    +2.31 percent    +2.40 percent

overall manufacturing:              +1.73 percent    +1.73 percent    +1.71 percent

durable goods:                           +2.10 percent    +2.10 percent    +2.05 percent

fabricated metals products:        +1.58 percent   +1.56 percent    +1.36 percent

non-electrical machinery:          +2.19 percent    +2.20 percent   +1.95 percent

automotive vehicles & parts:        0 percent         -0.23 percent    -0.69 percent

household appliances*:               not available     -6.31 percent    not available

aerospace products & parts*:      not available    +8.38 percent    not available

*data are one month behind

The loss of the metals-using sectors’ employment momentum in relative and absolute terms can be easily seen. But the more important comparison is between the above figures and those below, which present these trends for the first 10 months of the metals tariffs.

                                                   Old thru Dec    New thru Dec      Thru Jan

entire private sector:                 +1.37 percent   +1.36 percent   +1.60 percent

overall manufacturing:             +1.45 percent   +1.39 percent   +1.49 percent

durable goods:                          +1.67 percent   +1.72 percent   +1.97 percent

fabricated metals products:      +1.75 percent    +1.57 percent   +1.78 percent

non-electrical machinery:        +2.20 percent    +2.33 percent   +2.57 percent

automotive vehicles & parts:  +0.77 percent     +1.07 percent   +1.15 percent

household appliances*:            not available      -2.21 percent     not available

aerospace products & parts*:   not available     +5.51 percent    not available

*data are one month behind

This table shows that except for the household appliances sector (which has faced a separate, product-specific set of tariffs on large household laundry equipment since February, 2018), and automotive, the metals-using sectors were creating new employment at a considerably faster pace than both the overall private economy and overall manufacturing. And automotive was closing the gap.

Aside from trade, the White House, and everyone seeking the best for the U.S. economy, should also be troubled by the drop in September in the year-on-year manufacturing jobs increase to 117,000. That’s the worst such performance since August, 2017’s 112,000 and less than half the rate of the previous September annual improvement (266,000).

Better news for Trump-ers? Manufacturing job creation during the first 31 months of the Trump presidency is still much better (464,000) than during the last 31 months of former President Barack Obama’s administration (198,000).

Matters look better for the President (and manufacturing workers) on the wages front. Although industry’s pre-inflation hourly pay only inched up on month by 0.07 percent, that result beat the 0.04 percent dip for the overall private sector. (The Labor Department, which tracks the employment and wages figures, doesn’t monitor public sector wages since they’re set largely by politicians’ decisions, not largely by market forces. Therefore, they say almost nothing about the state of the labor market or the economic in general.)

Moreover, this relatively good manufacturing’s wage performance continued a slow relative catch up trend that began this year. Since January, current-dollar private sector pay is up 1.92 percent, versus 2.20 percent for manufacturing workers.

All the same, since the current economic recovery began, in mid-2009, private sector wages have risen by 26.87 percent. Manufacturing’s increase? Only 21.03 percent. And these manufacturing wages rose faster during the last 31 months of the Obama presidency (6.04 percent) than during the first 31 months of the Trump administration (5.53 percent). 

The safest economic conclusion seems to be that manufacturing hiring is hardly in the dumps – as suggested by the latest (also September) soft data from the Institute for Supply Management.  Nor does this looks like a “Tariff-mageddon” is upon us. But manufacturing job creation is also well off 2018’s robust pace, and the more so in major trade-affected industries . And its underlying situation will as more difficult to describe the Boeing and General Motors effects become visible (assuming the auto strike isn’t settled quickly).

But as cautious as that analysis is, the political implications as the 2020 presidential campaign heats up are even murkier. For barring a dramatic change in the manufacturing picture, they’ll depend on voters deciding whether the Trump manufacturing, trade, and overall economic record are good enough.