(What’s Left of) Our Economy: Smile When You Say “Wage Inflation”

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inflation-adjusted wages, manufacturing, private sector, wages, {What's Left of) Our Economy

If you’re really determined to make the case that wage inflation is (finally) taking hold in the U.S. economy, you can find some supporting evidence in the government’s new report on the subject. But you need to look awfully hard, and you also have to ignore other data suggesting that this proposition is still pretty far-fetched.

First the new (July) numbers. (They’re still preliminary, like the June results, which are unchanged.)

For the private sector overall, real wages rose by 0.19 percent month-to-month – lower than June’s 0.28 percent increase. Year-on-year, real wage improvements decelerated, too – from 0.94 percent in June to 0.75 percent in July.

Manufacturing’s results were more robust, with inflation-adjusted wages advancing faster on month in July (0.46 percent) than in June (0.18 percent). Acceleration was evidence on an annual basis, too, with the July year-on-year growth of 0.83 percent besting June’s 0.55 percent. In fact, the July annual increase was the greatest since December (1.03 percent).

The annual constant-dollar statistics contain the strongest signs of vibrant life on the wages front. In particular, year-on-year increases this year have strengthened from 0.09 percent in January to 0.75 percent in July, and in manufacturing from 0.28 percent to 0.83 percent during this period. And that manufacturing figure was the year’s best. As reported above, however, the best annual private sector real wage growth of this year came in June.

In addition, if you more than a year back, you can see that annual real wage growth has slowed considerably after a notable speed-up earlier in the current economic recovery.

For example, for the private sector, after improving by 0.59 percent total between July, 2011 and July, 2014, real wages jumped 2.04 percent between 2014 and 2015, and by 1.90 percent between 2015 and 2016, before the latest, much slower, 0.75 percent rise.

In manufacturing, between July, 2011 and July, 2014, real wages actually dropped by 0.66 percent. The following Julys saw a 1.34 percent increase that nearly doubled to 2.26 percent over the next year before settling back to 0.83 percent during the latest July-July period.

But for me, the most revealing real wage numbers are those measuring its change throughout the current economic recovery. Since it began, in mid-2009, after-inflation private sector wages have risen only by 4.75 percent, and real manufacturing wages are up a mere 2.05 percent. Until those increases get much bigger, warnings of wage inflation understandably will be seen as sick jokes by most American workers.

(What’s Left of) Our Economy: Real Wage Growth Keeps Disappointing

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inflation, inflation-adjusted wages, Labor Department, manufacturing, private sector, real wages, recovery, wages, {What's Left of) Our Economy

The economics world is becoming ever more puzzled by the sluggishness with which American wages have been rising during the current economic recovery despite very low rates of official unemployment. Judging by the new June inflation-adjusted wage figures released today by the Labor Department, all the usual suspects are going to be wondering about wages lag for some time to come.

The new data left unrevised both the finalized (for now), April figures, and the still preliminary May results.

For the former, constant dollar wages were flat month-to-month and up 0.28 percent year-on-year, and for the latter, they increased by 0.28 percent on month and 0.56 percent on year.

The June numbers? In the same neighborhood, with a monthly advance of 0.19 percent and a yearly improvement of 0.84 percent. For some context, real private sector wages increased nearly twice as fast between the previous Junes – by 1.62 percent.

Manufacturing, once the economy’s wages leader, kept its recent laggard status. Its (now final) April and (still preliminary) May results were unrevised, too – which in this case contained some good news. The former monthly increase of 0.55 percent, the best since August, 2015’s 0.66 percent, stayed intact. So did the annual increase – which was identical. At the same time, May’s 0.28 percent monthly decline is still on the books, too, as was the year-on-year change – which was zero.

As with after-inflation wages in the private sector overall, after-inflation manufacturing wages performed slightly better in June. They inched up by 0.09 percent on month and rose 0.37 percent on year. But the latest annual increase was much slower than that between June, 2015 and June, 2016 – 1.32 percent.

And nothing makes clearer the long-time stagnation of overall private sector and manufacturing wages than seeing their inflation-adjusted change during the economic recovery – which marked its eighth birthday last month. For the private sector, they’re up a total of 4.46 percent. For the manufacturing sector, the rate has been less than a third as fast – 1.32 percent. Which raises the question, “What comes first: the end of the recovery or the end of wage stagnation?

(What’s Left of) Our Economy: What “Retail-pocalypse”?

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bricks and mortar, electronic retailing, Employment, hiring, job openings, Jobs, JOLTS, on-line shopping, private sector, retail, {What's Left of) Our Economy

Could the evidence be clearer? President Trump constantly bewails job losses in parts of the economy like manufacturing and coal mining. But he’s ignoring the much larger employment bloodbath in the nation’s retail sector. Worse, the contrast shows what a racist and sexist Trump is, since minorities and women make up much larger shares of the workforce in retail than in factories and mines.

Here’s one answer: The evidence for these propositions could be a lot clearer. Indeed, according to the U.S. government’s employment statistics, it doesn’t exist.

I decided to look at the numbers because the JOLTS data for May came out this morning, and I was once again amazed at the results for retail. As known by RealityChek regulars, these data measure turnover in the labor force, and are highly regarded by no less than Fed Chair Janet Yellen – a leading labor economist. The new figures, which are still preliminary, show that American retailers claimed 638,000 job openings in their businesses, and hired 718,000 new workers (the latter data represent total positions filled, not net new hires).

It’s true that the openings numbers in particular can be dicey. But those for this past May seem pretty consistent with the data going back many years. Moreover, they show that over the last eight years (practically the length of the current economic recovery), retail openings have more than doubled, and hires are up by nearly 31 percent. Both indicators are lower than that for the private sector as a whole (where job openings are up 140.14 percent, and hires are up 45.24 percent since May, 2009). But the gap is hardly yawning. Nor is there any indication from the JOLTS data that retail openings or hires have lost major – or any – momentum in the last few years.

The actual net new job-creation numbers don’t reveal any “retail-pocalyse,” either. Since June, 2009 (when the current recovery officially began) retail payrolls have grown by nine percent. That’s slower than the increase overall private sector employment (14.39 percent). But the gap proportionately was actually greater during the previous recovery, when private sector employment rose by 5.83 percent, and the retail sector’s staffing was up by 3.18 percent.

Maybe this is because, as widely reported, jobs are migrating from bricks and mortars retail stores to on-line shopping businesses? Absolutely. And this trend is indeed rising in importance. During the previous recovery (which only lasted six years, from the end of 2001 through the end of 2007), electronic retail employment rose by 64 percent – just about a third as fast as during the current recovery (174.44 percent).

But in absolute terms, the electronic retail sector is hardly a mass employer. Its workforce totaled less than 260,000 as of this May. Retail overall employed just under 15.85 million that month, and during the recovery, bricks and mortars payrolls grew by a not-too-shabby 1.14 million.

At the same time, the actual employment figures do show that retail hiring is running out of steam, at least for the time being. Year-on-year, the sector boosted payrolls by just 0.12 percent. The previous two May-May annual increases? 1.37 percent between 2015 and 2016, and 1.71 percent the year before. By contrast, employment grew by 12.22 percent in electronic retailing from May, 2016 to May, 2017, and by 12.60 percent the year before. So conventional stores are now losing employees on net.

At the same time, these results are a far cry from a blood-letting. And annual job-creation in the overall private sector has been slowing as well. Further, many observers insist that bricks and mortars companies long built way too many stores. So their payrolls (and overall scale) may, at least to some extent, simply be returning to more sustainable levels. These conclusions obviously won’t satisfy the Trump-haters among us. They’re simply consistent with the facts.

(What’s Left of) Our Economy: Where the Trump Record is Looking Different

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Barack Obama, Bureau of Labor Statitics, Employment, Great Recession, healthcare, Jobs, Mainstream Media, private sector, real private sector, recovery, subsidized private sector, Trump, {What's Left of) Our Economy

Since of course there’s no Mainstream Media bubble or echo chamber, it must be a total coincidence that the press last week was filled with articles noting that the U.S. economy today (which President Trump keeps praising) looks pretty similar to the U.S. economy before the last presidential election (which candidate Trump decried).

Generally speaking, these observations are right – with one important exception that’s been universally overlooked: Job creation this year so far has owed significantly more to the “real private sector” of the American economy and less to the “subsidized private sector.” That is, more hiring is coming in the part of the economy in which employment levels generally reflect free market forces, and therefore speak volumes about the whole economy’s fundamentals. And less hiring is taking place in industries like healthcare services, where job creation largely reflects levels of government support that stems from political decisions. Therefore, however worthy their services, employment performance in these sectors says little about the state of the economy.

RealityChek observed the possible start of this trend two months ago. Now that we’re halfway through the year, it looks more solidly established. As usual, the best evidence comes from comparing job creation in the first six months of this year with job creation during the same periods in past years. (Keep in mind, however, that the statistics for May and June, 2017, are still preliminary; that is, they’ll be revised in the next two months – and then revised again early next year along with the results for all of 2017. For good measure, the Bureau of Labor Statistics will recalculate them again further down the road.)

For the first six months of this year, total U.S. net employment gains (in the “non-farm” sector that represents the Bureau of Labor Statistics’ American employment universe) came to 1.079 million. Of these, 20.95 percent came in the subsidized private sector, and 74.05 percent came in the real private sector. (The rest came in government at all levels.)

Those figures are much different than those for the first six months of 2016 – 28.44 percent and 60.83 percent. In fact, the January-June 2017 results represent the first time since 2014 when the subsidized private sector share of total job creation fell and the real private sector share rose. At the same time, the subsidized private sector’s role in total hiring is way up from January-June, 2013 – when it was only 14.22 percent. And the real private sector’s role is way down (from 92.63 percent that year).

Another way to look at hiring developments: During the first half of 2013, subsidized private sector job creation totaled 13.31 percent of job creation in the private sector as it’s conventionally defined (that is, including the subsidized industries). By the first half of 2016, the subsidized industries’ share of conventionally defined private sector net new employment had more than doubled: to 31.86 percent.

Finally, let’s see how these employment numbers have changed on a stand-still basis.

In December, 2007 – on the eve of the Great Recession – the subsidized private sector accounted for 13.22 percent of all non-farm jobs, the share of the private sector conventionally defined was 83.83 percent, and that of the real private sector was 70.62 percent.

In June, 2009 – when the recovery began – these figures were: subsidized private sector, 14.97 percent; conventional private sector, 82.77 percent; and real private sector, 67.80 percent.

And this June? Subsidized private sector, 15.78 percent; conventional private sector, 84.73 percent; and real private sector, 68.96 percent.

In other words, although the punch has slacked off a bit, the subsidized private sector is still punching above its weight when it comes to job creation. We know this because its share of new hiring for the first six months of this year (20.95 percent) remained greater than its share of total American employment as it stood in June (15.78 percent). The real private sector is outperforming, too, but the gap is much smaller proportionately.  (The – big – slacker has been the public sector.)

Also, eight years into the current economic recovery, the real private sector’s share of total American jobs is smaller, and the subsidized private sector’s share is larger, than they were at the start of the expansion.

There’s no doubt that the American job market today is in much better shape than it was at the start of the recovery – and that most of this progress took place before President Trump took office. Nor is there much reason to doubt that until the economy’s reliance on the subsidized private sector for job creation falls considerably more, it will difficult to claim legitimately that the employment scars of the recession have fully healed. But something else that’s now increasingly clear is that a crucial job quality front, the Trump economy is looking notably different – and better.    

(What’s Left of) Our Economy: Rising Fed Rates Amid Slowing Real Wages?

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Federal Open Market Committee, Federal Reserve, inflation-adjusted wages, interest rates, Labor Department, manufacturing, private sector, recovery, wages, {What's Left of) Our Economy

Although it’s usually hard to muster much sympathy for the governors of the Federal Reserve, today might be an exception.

On the one hand, this afternoon their Open Market Committee is scheduled to announce its latest decision on interest rates, and it’s given many indications that it’s going to again make the cost of borrowing a little more expensive. That probably means, all else equal, that economic activity in the United States (including growth and hiring) will slow down, at least in the short term.

On the other hand, the U.S. government reported a slew of economic data this morning indicating that the economy is getting weaker – which would make at least the timing of even a modest rate hike awkward. Among them were inflation-adjusted wage figures (for May) that once more reveal a significant slowdown in American workers’ real take-home pay.

For the private sector overall (the Labor Department, which calculates these figures, doesn’t report inflation-adjusted wages for public sector workers, because their government-set pay tells us little about the state of the economy), the news wasn’t bad at all on a month-to-month basis. Constant-dollar wages rose 0.28 percent from their April levels – after having gone exactly nowhere the month before.

But the year-on-year results – which smooth out inevitable random-ish monthly fluctuations – were again nothing less than discouraging. From last May until this May, this price-adjusted pay increased by just 0.56 percent. That was indeed their strongest annual improvement since last December’s 0.75 percent. But it was much less than half the after-inflation pay advance between the previous Mays (1.42 percent), much less that of May, 2014-May, 2015 (2.33 percent).

So largely as a result, during the current economic recovery – which is nearly eight years old – real private sector wages are up only 4.26 percent.

But according to the Labor Department, private workers overall have been enjoying salad days compared with manufacturing workers. The latter’s real wages fell on month in May by 0.28 percent. It’s true that this decline followed an upwardly revised 0.55 percent sequential April increase that was the sector’s best since August, 2015’s 0.66 percent. But the May monthly decline was the sector’s worst since last November’s 0.64 percent slide.

Manufacturing’s year-on-year real wage results are scarcely better. In May, they flat-lined — their worst such performance since September, 2014’s 0.29 percent annual dip. The two previous May annual real wage increases”? Between 2015 and 2016, 2.45 percent, and between 2014 and 2015, 1.53 percent.

And during the nearly eight years since the economy began growing once again, real manufacturing wages are up 1.31 percent.

These glum wage data notwithstanding, there still could be good reasons for the Fed to announce another rate hike today. As RealityChek readers know, it’s entirely possible that recent years of stimulus from the central bank has mainly stolen potential growth from the future by promoting artificial growth. Similarly, as the Fed itself has acknowledged lately, monetary policies that have made credit so cheap – and indeed, practically free for blue-chip borrowers – for so long can encourage the kind of crackpot investing and financial instability that could trigger another global crisis.

If the Fed emphasizes these concerns in its (usually brief) statement accompanying the interest rate announcement, or in the more detailed Open Market Committee meeting minutes it publishes later, it will deserve the nation’s gratitude for straight talk – however overdue it might be. If, however, the central bank insists that it’s raising rates mainly because the economy is looking encouraging, it will be increasingly deserve the label of mindless cheerleader.  

(What’s Left of) Our Economy: JOLTS of Confusing News About the U.S. Jobs Market

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government jobs, job openings, JOLTS, Labor Department, labor shortage, living standards, manufacturing, private sector, productivity, recovery, retail, wages, {What's Left of) Our Economy

Since the U.S. economy has settled at its current level of near-full employment (at least by the official figures), the monthly JOLTS reports issued by the Labor Department have been attracting much less attention – including from me! After all, with so many Americans working, it’s been less important (though not totally unimportant) to learn about one of the key findings in each such survey of labor market turnover – how many new job opportunities business and government say they’ve been creating. 

So it’s not surprising that today’s JOLTS report (for April) hasn’t had much impact on the financial markets this morning. But it still contained more than its share of noteworthy results that reinforce what we think we already know about the economy’s current biggest problems, and that raise major questions about other portions of the conventional wisdom.

The overall job openings number, for example, was quite the stunner: At 6.044 million, it was an all-time high in absolute terms. (The JOLTS series dates from December, 2000.) And the 4.48 percent increase over May’s 5.785 million level represented the biggest monthly jump since last July’s 7.91 percent.

Openings in the private sector hit a new record in April, too (5.464 million). And that 4.20 percent monthly rise was the great sequential increase since last July (8.46 percent).

But as RealityChek regulars know, the economy’s growth has been sluggish even by the meager standards of the current economic recovery. In the first quarter of this year, real growth came in at a paltry 1.15 percent annual rate. So the JOLTS figures indicate that employers feel they need record numbers of new employees even though as a group their output is historically lousy.

That adds up to more evidence that American business boosting its productivity only sluggishly at best – which is awful news given that productivity growth is the nation’s best hope for improving living standards in a sustainable, not bubble-ized, way. And as I’ll be reporting on shortly, the latest government labor productivity numbers once more confirm that the economy is stuck in a productivity crisis.

Yet these JOLTS results carry more complicated implications for another broadly accepted feature of the American economy. They support the idea that U.S. businesses are struggling to overcome almost unprecedented labor shortages. How else to explain the enormous number of reported job openings? But companies that desperate to find workers should be raising wages at rapid and indeed accelerating rates. Everything that we know about hourly pay, though, tells us that nothing of the kind is happening. If anything, wage growth, which has underwhelmed throughout the current recovery, is showing signs of slowing.

One other new record revealed by today’s JOLTS report – total government job openings (540,000) have never been higher except in April, 2010, when the call went out for temporary Census workers. Even more interesting, most of the openings were in state and local governments outside the schools.

Also somewhat surprising: The “retail-pocalypse” so commonly bemoaned or hailed (depending on your viewpoint) is nowhere to be seen in this JOLTS report. Sure, retail job openings fell between March and April from 593,000 to 577,000. Moreover, that’s the lowest level since December, 2015, and the numbers now are generally, though unevenly, trending down. But for the first more than seven years of this nearly eight-year old recovery, they were trending solidly up. With overall economic growth down and consumers still cautious, the reported retail openings numbers are far from screaming “disaster!” – or even “serious trouble!”

Finally, although manufacturing output has been modestly recovering lately from its most recent recession, its job openings fell from 404,000 in March (the second highest record and best since January, 2001’a 496,000) to 359,000 in April. Still, the decline followed a major increase in March (from 364,000), and the manufacturing numbers have been pretty volatile for more than two years.

Maybe the safest conclusion to draw from the JOLTS numbers is that, for now, the economy is heading for more of the same. Whether that’s the safest result for incumbent American politicians is another matter entirely.

(What’s Left of) Our Economy: As Political Wars Rage, U.S. Wages Keep Stagnating

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inflation-adjusted wages, manufacturing, private sector, real wages, Russiagate, Trump, wages, workers, {What's Left of) Our Economy

The tragedy of the continuing Trump and “Russiagate” political battles was perfectly illustrated yesterday by the release of the Labor Department’s newest data on inflation-adjusted wages. As the administration and its foes intensified a fight that’s ultimately over the legitimacy of the president’s White House win last November, the statistics made clear that the growth of Americans’ paychecks is still deeply stuck in the mud.

The real wage figures are always one month behind their pre-inflation counterparts, so the new numbers only take us through April. And they and the March results are still preliminary. At first glance, the news looked mixed. On a monthly basis, wages for the private sector (these data leave out government workers’ wages, since they’re determined largely by politicians’ decisions, not market forces) inched up only 0.09 percent in April. That was worse than March’s 0.28 percent improvement, and that March figure was revised down from the initial 0.47 percent reading.

The picture was somewhat brighter for manufacturing; April’s sequential increase of 0.46 percent was its best since August, 2015 (0.66 percent). But the March rise was downgraded from 0.37 percent to 0.28 percent.

And no one should be happy about the year-on-year changes. April’s was 0.37 percent for the private sector as a whole, and 0.46 percent for manufacturing. Between the previous Aprils, the numbers were 1.42 percent and 1.79 percent, respectively.

The cumulative results during this nearly eight-year old economic recovery? After-inflation private sector wages have increased only 4.07 percent, and manufacturing wages are up only 1.49 percent.

In other words, American workers – and especially those in manufacturing – have all but lost nearly eight years when it comes to their ability to keep up with the cost of living. And given Washington’s focus on the political wars, more lost months at the least are likely on the way.

(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.

(What’s Left of) Our Economy: Best Stretch of U.S. Manufacturing Jobs Gains in Nearly Two Years Continues but Wages Outlook is Cloudy

Tags

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

U.S. monthly manufacturing employment grew for the fifth straight month in April for its best such performance since a nearly two-year stretch of sequential gains from 2013 to 2015. As a result, the sector continued to edge out of its latest jobs recession. But the monthly pace of employment increases (6,000 in April) fell for the third consecutive month.

In addition, manufacturing’s share of total non-farm payrolls fell to its latest record low – 8.46 percent. Revisions were negative by 2,000. Year-on-year manufacturing employment growth sped up again in April (to 40,000) – its best annual improvement since February, 2016 (69,000).

Pre-inflation manufacturing wages in April recorded their best monthly improvement (0.68 percent) since last October (0.73 percent). And for the first time in four months, these manufacturing wage advances exceeded that of the overall private sector (0.27 percent.) Year-on-year current dollar manufacturing wage momentum seemed to stall out, registering its slowest such advance (2.71 percent) since last August (2.68 percent). But the strong monthly gain resulted in industry’s annual wages gains resuming their recent pattern of topping those of the private sector (2.55 percent).

Manufacturing remained a recovery-era jobs and wages laggard, but the gap in pay at least narrowed between March and April from a 22.81 percent difference between the recovery-era increase in cumulative private sector and manufacturing wage increases to an 18.61 percent difference. Yet the latest (March) real wage data kept showing manufacturing pay falling further behind.

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

>Manufacturing employment grew sequentially for the fifth straight month in April, enabling the sector to keep edging out of its latest jobs recession and record its best stretch of monthly employment improvement since the August, 2013 to July, 2015 period.

>But April’s monthly gain of 6,000 represented the third straight month of slowing advances, and helped drag industry’s share of total nonfarm payrolls (the government’s definition of the U.S. employment universe) to it’s latest all-time now – 8.46 percent.

>So did slightly negative revisions, with March’s originally reported 11,000 monthly jobs gain revised up to 13,000, but February’s already downgraded 26,000 increase reduced again to 22,000.

>On the brighter side, the April figures were good enough to produce a year-on-year manufacturing jobs improvement of 40,000 – the best such advance since February, 2016’s 69,000. The April annual advance also bettered that between the previous Aprils (35,000).

>Manufacturing wages presented a mixed picture, too. In April, industry pay before inflation enjoyed its best monthly increase (0.68 percent) since last October (0.73 percent). The spurt was especially welcome, since the sector’s monthly March wage change was revised down from 0.04 percent to zero.

>Moreover, for the first time since December, such manufacturing wage rises resumed outpacing increases in the private sector overall (0.27 percent).

>The year-on-year April manufacturing pre-inflation wage increase of 2.71 percent, however, was its slowest since last August (2.68 percent). It was lower, too, than that of April, 2015 to April, 2016 (2.99 percent). At the same time, the new April result also bested that of the private sector overall (2.55 percent), continuing a streak of out-performance that began in March, 2016.

>On a pre-inflation basis, manufacturing’s wage increases during the current economic recovery still trail those of the private sector, but the gap narrowed between March and April. The revised figures for the former month show that private sector wages had risen by 17.98 percent since the current expansio began in mid-2009 – 22.81 percent faster than manufacturing wages (14.64 percent).

>As of April, however, private sector wages during the recovery were up by 18.29 percent while manufacturing wages had improved by 15.42 percent – a gap of only 18.61 percent. ,since the expansion began in mid-2009.

>Yet when wages are adjusting for inflation, manufacturing’s performance looks worse than ever. The latest figures only cover March, but show that industry’s 0.37 percent price-adjusted monthly pay improvement fell short of the overall private sector’s 0.47 percent advance.

>Year-on-year, manufacturing wages were up only 0.19 percent – also worse than the (also meager) 0.28 percent rise for the private sector.

>As a result, real manufacturing wages have increased by only 0.93 percent during the current, nearly eight-year old economic recovery. Overall private sector wages are up 3.97 percent.

>In April, manufacturing retained its status as an employment laggard, too. During the recovery, its payrolls are up by only 5.71 percent. The total for employment in the private sector as a whole? 14.09 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 41.43 percent of those lost jobs (a total of 943,000). The private sector as a whole has boosted employment by 16.436 million.

>As a result, total private sector employment is now 6.62 percent higher than at the recession’s late-2007 onset, but manufacturing employment is still 9.82 percent lower.

(What’s Left of) Our Economy: New Evidence of a Crossroads for the U.S. Jobs Market

Tags

benefits, compensation, Employment Cost Index, Federal Reserve, inflation, Labor Department, labor market, labor unions, private sector, recovery, salaries, wages, {What's Left of) Our Economy

If you’re one of the American workers who’s been happy with the current economic recovery, you might have already seen peak pay gains. If you haven’t been satisfied, get ready for greater disappointment. And whatever category you fall into, you’d better hope that new U.S. government data on overall compensation paid by American employers is just a blip. Ditto that for the Federal Reserve, which is set to announce its latest decision on interest rates later today, and which seems convinced that the American labor market is healthy enough to withstand a series of hikes back toward historically normal levels.

Last week, the Labor Department issued its latest quarterly report on how much business shells out in terms of both wages, salaries, and benefits. The results in the main release looked pretty good, but they’re not adjusted for inflation – which means that they don’t tell the full story about whether or not compensation is keeping up with the cost of living. Luckily, Labor released the inflation-adjusted figures, too, and they make clear that whatever real compensation progress workers might have been recently been making could be in danger.

According to these constant-dollar Employment Cost Index (ECI) figures, real pay for all private sector workers was flat year-on-year for the quarter ending in March. (I don’t usually examine pay data that include government workers because their compensation is set overwhelmingly by political decisions, not market forces, and therefore don’t say much about the underlying strength of the labor market or the broader economy.)

That annual result was the worst since the quarter ending in June, 2014 – when after-inflation compensation also flatlined on an annual basis. By comparison, the real ECI between that first quarter of 2015 and the first quarter of 2016 rose by 0.97 percent.

Looked at quarter-to-quarter, the real ECI for private sector workers fell by 0.10 percent. The previous sequential change was a 0.29 percent improvement. Indeed, the latest numbers broke a two-quarter string of gains.

From a longer-range perspective, however, the current recovery still stacks up pretty well for private sector workers (although the data only go back to mid-2001). Since it began, in mid-2009, their total compensation is up by 3.60 percent. During the previous (shorter) expansion – which ran from late 2001 through late 2007, total inflation-adjusted compensation rose by only 2.36 percent.

The new real ECI results reveal similar trends for American manufacturing workers. The first quarter’s year-on-year 0.20 percent drop was the worst such result since an identical decrease in the final quarter of 2012. And the previous first quarter annual change was a 1.49 percent rise.

Sequentially, real manufacturing compensation also fell during the first quarter – by 0.29 percent. And as with overall private sector compensation, that was the first such decline in three quarters.

Interestingly, in terms of real total compensation, the current recovery has been a winner for manufacturing workers to an even greater extent than for all private sector workers. Combined constant dollar employer costs for wages, salaries, and benefits have risen by 4.72 percent – compared with a 1.99 percent advance during the previous recovery. (RealityChek regulars will note that these results contrast strikingly with those for wages alone, where manufacturing has been a major laggard. One reason is surely manufacturing’s relatively high unionization rate – which typically results in better benefits won and kept.)

If the Federal Reserve decides today to raise the federal funds rate it controls directly, or even if it simply stays determined to remains on a tightening path, it would signal its confidence that the American labor market remains on the mend following devastating losses during the last recession. Any doubts the central bank voices about its current strategy might indicate that it’s genuinely worried about the new ECI statistics – and that U.S. workers should be, too.