(What’s Left of) Our Economy: Inside that Big New Manufacturing Jobs Revision

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

Last Friday’s U.S. jobs report (for January) contained a special bonus: On top of the usual monthly numbers, and the insights they yielded on the impact of Trump tariffs on domestic manufacturing (described in this post), the statistics incorporated an annual revision that goes back several years – and they change the picture of industry that’s been available to date.

The big takeaways: U.S.-based manufacturing’s job creation performance has been slightly weaker lately than initially reported. But its wage performance has been more mixed – better in absolute terms but worse compared with the private sector overall. (The focus in this post when discussing relative performance is mainly on the private sector, because its economic performance stems largely from market forces. For the overall non-farm employment figure – the definition of the American employment universe used by the Labor Department, which reports these data, includes government jobs. Their results are driven largely by politicians’ decisions.)

First, let’s examine those latest monthly jobs numbers. They show that manufacturing hiring kicked off the new year on a soft note. Only 13,000 net new jobs were added – the worst such figure since August’s 8,000. And revisions were negative – with December’s initially reported 32,000 growth in payrolls downgraded all the way to 20,000.

As a result, 2018 still stands as manufacturing’s best job-creation year since 1997 – when employment grew by 304,000 on net. But the annual increase of 284,000 now stands at 264,000. Also noteworthy: The 2018 jobs gain far exceeded 2017’s 190,000 (which itself was first reported as 209,000.)

The downward revisions also decreased the improvement manufacturing had shown as a share of total non-farm employment. According to the previous employment release, manufacturing’s share of this U.S. jobs total came in just short of 8.56 percent – the best such figure since July, 2016’s 8.56 percent.

Today’s report lowered that December number to 8.52 percent – and kept July, 2016 at 8.56 percent. January’s share is 8.52 percent as well. The revised data show that manufacturing payrolls during the Trump administration have still been rising faster than total non-farm payrolls, since the figure for the first full Trump month stayed at 8.49 percent. But the out-performance has been more modest than previously judged.

So has the total increase in the number of manufacturing jobs since this figure bottomed in early 2010 – shortly after the official mid-2009 beginning of the current economic recovery. Before the latest revisions, Labor Department data showed that, through December, domestic industry had regained 1.389 million (60.58 percent) of the 2.293 million net jobs it had lost during the recession and its aftermath. Now, this figure stands at 1.356 million (59.14 percent of the lost jobs), and in January, it rose slightly to 1.369 million (59.70 percent).

Worse, the revised results show that manufacturing has been just as much of an employment laggard during this recovery than previously thought. Pre-revision, the Labor Department reported that overall private sector employment fell by 8.785 million from the December, 2007 onset of the last recession through its own February, 2010 bottom. These figures also pegged private sector jobs gains as 20.608 million from that low point through last December.

The revised private sector figures are 8.794 million jobs lost during the recession and its immediate aftermath, and 20.533 million regained through December. The January results pushed the jobs rebound figure up to 20.829 million.

On the pay front, the revisions show that manufacturing wages during the current recovery have actually risen slightly faster than previously reported, but that the gap with overall private sector wages actually widened.

First, the new monthly numbers. Pre-inflation hourly pay in manufacturing sank by 0.44 percent sequentially in January – the worst such performance since May, 2012’s 0.62 percent monthly drop. This decline greatly overshadowed the upward revision in December’s current dollar manufacturing wage improvement from 0.26 percent to 0.33 percent.

The overall private sector didn’t enjoy a great wage month in January, either: Pre-inflation hourly pay increased sequentially by only 0.11 percent – its worst such performance since October, 2017’s 0.15 percent decline. In addition, December’s monthly gain was revised down from 0.40 percent to 0.36 percent. But these latest results still beat manufacturing’s.

The January drop-off depressed manufacturing’s year-on-year pre-inflation wage gains down to 1.38 percent – the weakest such advance since February, 2015’s 1.25 percent. But the upward December monthly revisions did push that month’s annual increase up from 1.98 percent to 2.02 percent.

By contrast, the revisions increased December’s yearly current dollar private sector wage gain from 3.15 percent to 3.34 percent – the best since April, 2009’s 3.42 percent. January’s annual increase was 3.18 percent – also much better than manufacturing’s.

The new revisions improve manufacturing’s wage performance throughout the recovery, but not by much. Previously, such hourly pay was reported to have risen only by 18.60 percent from the expansion’s June, 2009 onset through December. Now that increase is judged to have been 18.72 percent, but the January monthly drop dragged down the new cumulative figure to 18.20 percent.

But from mid-2009 through December, pre-inflation hourly wages for the overall private sector also rose faster than previously thought – by 24.35 percent rather than 24.21 percent. As a result, the gap between the two widened, with private sector wages having increased by 30.07 percent faster than manufacturing wages during this period, not the 29.68 percent originally reported.

And the January numbers broaden the gap still further – to 34.50 percent.

The January inflation-adjusted wage figures won’t be out till later this month, but they don’t favor manufacturing, either, especially over the longer run.

In real terms, December’s monthly manufacturing wage increase has been upgraded from 0.28 percent to 0.37 percent, but the November results are literally a mirror image. They’ve been revised down from a 0.37 percent improvement to 0.28 percent.

The overall private sector’s after-inflation December wage gains have been revised down, too – from 0.46 percent to 0.37 percent. It’s 0.19 percent November advance was left unchanged.

On an annual basis, the new revisions still leave manufacturing’s December real wage gains at zero. At least that represented an improvement over the previous annual decrease of 0.28 percent. The overall private sector’s performance was upgraded from 1.12 percent to 1.30 percent – its best such results since 2015’s 1.82 percent.

The story is scarcely better for manufacturing when extended to the entire recovery. As with current-dollar wages, constant-dollar wage growth during this period was revised up – from 0.75 percent to 0.84 percent. The real private sector wage increase was upgraded, too – from 5.43 percent to 5.63 percent. So the real wage performance gap widened actually decreased – from 7.24 to 1 to 6.70 to 1.

Nonetheless, manufacturing remains in a real wage recession.  After-inflation hourly pay is down 0.09 percent on net since February, 2017. 

 

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(What’s Left of) Our Economy: Today’s Jobs Data Once More Refutes Tariff Alarmism

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aluminum, China, Jobs, manufacturing, metals tariffs, metals-using industries, private sector, steel, tariffs, Trade, Trump, {What's Left of) Our Economy

As usual with these releases lately, the newest U.S. monthly jobs report (for November) contains lots of valuable information about the impact of President Trump’s tariff-centric policy on the domestic economy. And as usual, this morning’s findings provide ample evidence that manufacturing sectors widely reported to be either currently hurting or likely to be damaged by levies either on imports of steel and aluminum, or products from China, are actually outperforming the rest of industry and even the rest of the entire economy.

Let’s begin with manufacturing industries that make heavy use of metals as inputs, and that have often been portrayed as major victims of the Trump metals tariffs. Here are the changes in their payrolls since April – i.e., the months since those tariffs began to be imposed in late March. For comparison’s sake, the table also includes the employment results for the entire private sector, and for manufacturing as a whole.

                                              thru September     thru October       thru November

entire private sector:             +0.77 percent      +1.11 percent       +1.10 percent

overall manufacturing:        + 0.76 percent      +0.96 percent       +1.18 percent

durable goods:                      +1.01 percent      +1.21 percent       +1.40 percent

fabricated metals products:  +1.16 percent      +1.12 percent       +1.01 percent

non-electrical machinery:    +1.39 percent      +1.68 percent       +1.85 percent

automotive vehicles & parts: +0.08 percent    +0.73 percent       +0.64 percent

household appliances:            -0.31 percent     -1.10 percent         not available

aerospace products & parts: +3.75 percent      +4.43 percent        not available

Once again, the heavy metals-users generally have been performing well. Household appliances and the automotive sector seem to be the noteworthy laggards. But the former have also been hit by a separate set of tariffs on large household laundry machines as well as a slump in the nation’s housing sector. And most analysts believe that U.S. auto sales have recently peaked because of that market’s individual dynamics and cycles.

Supporting this analysis: The strong performance of other big metals-using industries, like aerospace and non-electrical machinery – which underscores what should be the obvious reality that numerous developments and forces influence employment trends in any given part of the economy.

The only possible area of concern is fabricated metals products, where jobs are still increasing, but where the pace of employment creation has slowed to some degree.

It’s tougher to judge definitively the impact of President Trump’s tariffs on imports from China both because they haven’t been in place for as long as the metals duties, and because they entail such a large number of goods. But given those caveats, it’s still tough to see anywhere in the jobs data support for the conviction that these tariffs either are backfiring badly on American industry or will do so because U.S. domestic manufacturers rely so extensively on so many Chinese-made parts, components, and materials.

If you’re skeptical, take a look at the job-creation records of key American industries with extensive global supply chains – including many Chinese links. This table starts in July, because the initial tranche of China tariffs was imposed during the first week of that month. And again, for comparison’s sake, it includes the economy’s entire private sector:

July through November

entire private sector:                        +0.63 percent

overall manufacturing                     +0.65 percent

chemicals:                                       +1.62 percent

non-electrical machinery:               +0.61 percent

computer & electronics products:   +0.47 percent

automotive vehicles & parts:          +0.96 percent

non-electrical machinery:               +0.61 percent

Judging the China’s tariffs’ real impact will of course become even tougher for the time being, given the 90-day trade truce just agreed to by Washington and Beijing, which may reduce domestic companies’ uncertainty as to the wisdom of continuing business-as-usual with China – or may not. So far, however, claims of widespread or even likely economic harm stemming from this bilateral trade war look as deserving of urban legend status as this year’s metals tariffs alarmism.

(What’s Left of) Our Economy: America’s Persistent China Delusion Syndrome

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agriculture, China, comparative advantage, establishment, Made in China 2025, Mainstream Media, offshoring lobby, private sector, tariffs, The New York Times, The Wall Street Journal, Trade, {What's Left of) Our Economy

The week has barely started and already the Mainstream Media have delivered some genuinely bizarre – indeed seemingly clueless – China-related moments.

There’s the big New York Times series titled “China Rules.” It usefully describes how the People’s Republic has completely confounded the bipartisan American political and policy establishment’s confidence that its growing integration into the global economy would turn it into more cooperative, more economically and politically open power. And thankfully, the series does point out this mistaken official U.S. optimism – which it notes spanned fully eight presidencies. But it says nothing about the massive amounts of money spent by offshoring multinational corporations in Washington, D.C. and the rest of the country’s political and policy communities (encompassing academia and think tanks alike) to foster China myth-making and spoon-feed it to the national media, which overwhelmingly swallowed it hook, line, and sinker.

Given that this self-interested myth-making bears so much blame for China’s emergence as a major threat to America’s national security and prosperity, it’s imperative that The Times (and the rest of the Mainstream Media) start telling this story in detail – both to reveal how active and influential the myth-makers remain, and to reduce the odds that they’ll stage a comeback down the road.

The Times itself just provided one clear example of such influence in a tweet this morning about a piece on the just-concluded summit of Asia Pacific countries in Papua New Guinea – which tells readers that “The Chinese delegation sought to reaffirm its opposition to the protectionism and unilateralism that have been a focal point for criticism of the United States.” Honestly. “Reaffirm”? Like China’s (stated) opposition to protectionism as such is something to be taken seriously? Or that even China takes seriously?

Are such longstanding journalistic conventions the product of simple laziness? Or of literally decades of media reliance for information and analysis on myth-makers with strong vested stakes in portraying China as a steadily reforming economy? The answer, of course, is “both” – and that the latter fosters the former.

Another example of these habits’ persistence: today’s Wall Street Journal article describing how China’s central government and major local governments are now trying to support a “private sector” that “has become a weak link in a slowing economy.” Yes, there are entities in China that are now customarily called “private sector.” But in a command economy like China’s, where the state wields power in a wide variety of direct and indirect ways, they have about as much in common with genuine private sector companies as fool’s gold has with the real thing.

But perhaps the week’s most important China media reference – at least so far – appeared in a Journal article on how the country’s farm sector is coping with the advent of high tariffs on many U.S. agricultural products. It came in the form of some statements made by China’s President, Xi Jinping that deserve major coverage on their own, but that were presented as little more than boilerplate:

“Unilateralism and trade protectionism are rising, forcing us to take the road of self reliance. This is not a bad thing. China ultimately depends on itself.”

Xi was speaking specifically about agriculture, and can’t reasonably be criticized for wanting his country to be more self-sufficient in this sector. After all, what national leader could genuinely be happy about depending on other countries for food?

But there are two glaring problems brought up by his remarks. First, as I’ve written frequently, the contemporary global trading system, and the conventional economics underlying it, condemn the quest for self-sufficiency in any part of a country’s economy as a No-No. Trade (and therefore production) patterns are supposed to help develop the most efficient global division of labor possible. In plain English, this means that countries are supposed to specialize in what they make best, and to remain satisfied with importing most of the rest. And if food production isn’t their strong suit, they should be confident that they’ll always be able to buy from abroad all that they need.

Second, as I’ve also written, China’s quest for self-sufficiency is hardly confined to food. The country’s policy record makes clear that it’s the goal for its entire economy. The regime’s Made in China 2025 manufacturing and technology program is only the latest example. Among its objectives is reducing the country’s dependence on foreign-made parts, components, and materials for a wide range of manufactures. In other words, China’s leaders aren’t satisfied with importing goods and services where it currently lacks what economists call “comparative advantage.” They want to create this advantage for China – and according to a very specific schedule of highly concrete goals.

Whether dealing with another party, it’s crucial to define it correctly, and doubly so when that party is a “competitor” or a “rival” or outright enemy. Thanks to articles like those above, Americans have just been reminded vividly how far much of their leadership class remains from achieving this objective when it comes to China.

(What’s Left of) Our Economy: Manufacturing’s Real Wage Recession Keeps Lengthening

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

Whether it’s because of unskilled, unproductive newbies or continuing jobs offshoring or (as likely) some combination of these and other trends, today’s real wages figures from the Bureau of Labor Statistics can’t be read as good news for American manufacturing workers. For it means that the lengthy technical real wage depression they’ve been suffering on average just got longer.

Because of a 0.37 percent monthly drop in October – the biggest such falloff since August, 2017 (0.64 percent) – inflation-adjusted hourly pay in manufacturing is now down on net since December, 2015 (by 0.19 percent). That’s one month longer than this slump had lasted as of the previous data in this series, and a decline that’s lasted far longer than the definition of a technical recession: a cumulative decline over at least two consecutive quarters.

Another measure of manufacturing’s pay doldrums: After-inflation hourly wages are now back to exactly their level in June, 2009 ($10.72), when the current recovery began. That is, they’ve made absolutely no progress over a more than nine-year period.

Moreover, the October figures indicate that current-dollar manufacturing wages will weaken further before they start strengthening. In particular, the 1.11 percent annual decrease was the biggest such deterioration on a relative basis since October, 2012’s 2.09 percent nosedive. By contrast, between October, 2016 and October, 2017, real manufacturing wages dipped by only 0.28 percent.

The real wage news for all private sector workers was better – but not by much. On month in October they were down 0.09 percent (their first such drop since February). On an annual basis, though, they rose by 0.65 percent. And meager as that is, it was the best yearly performance since January (0.66 percent), as well as a substantial improvement over the previous October’s 0.19 percent.

As a result, though, inflation-adjusted private sector wages still have advanced by only 4.75 percent since the current economic recovery began in mid-2009. And whether justified by inadequate skills levels or not, for an economy that remains strongly dependent on consumption for its growth, that doesn’t sound like a formula for lasting prosperity.

(What’s Left of) Our Economy: “Tariff Victim” US Industries Remain Full of Job Openings

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business, China, durable goods, employers, job openings, Jobs, JOLTS, labor shortages, manufacturing, metals tariffs, metals-using industries, private sector, quits, tariffs, Trade, Trump, workers, {What's Left of) Our Economy

If today’s government data on U.S. jobs openings don’t prompt loud mea culpas and apologies from the tariff-alarmists in the Mainstream Media and elsewhere in America’s globalization cheerleading establishment, I don’t know what will.

Recall that Americans have been swamped in recent months with reports that President Trump’s trade curbs have already been decimating American manufacturing.  And since they have been in place the longest, his metals tariffs (on most steel and aluminum imports) have been treated as prime examples, with metals-using industries being the prime victims.

But the new figures on job openings in major sectors of the economy (contained in the latest monthly release of the “JOLTS” numbers – the “job openings and labor turnover series”) are simply the latest statistics thoroughly debunking these claims.

Here are the results for job openings from April (because the metals tariffs began to be imposed in late March) through September (the most recent month covered by the JOLTS reports):

private sector:     +2.30 percent

manufacturing:   +7.08 percent

durable goods:   +7.47 percent

As has been the case with so much other data, the durable goods super-sector of manufacturing – the portion of industry containing the biggest metals-using industries – outperformed the rest of manufacturing and the entire economy in the number of employment opportunities it claimed were available.

And although the number of job openings in durable goods dipped from August to September (whose figures are still preliminary), they fell much less than in the rest of the economy.

private sector:     -2.85 percent

manufacturing     -4.72 percent

durable goods     -0.66 percent

Moreover, the 302,000 durable goods jobs openings reported preliminarily in September were the second largest number on record (going back to late 2000). The all-time high? August’s 304,000.

Some critics maintain that employers have incentives to exaggerate their claims of job vacancies. The motives cited include reinforcing contentions of “skills gaps” and other forms of labor shortages; rationalizing the persistence of high unemployment rates or sluggish wage growth; and pushing government or schools to take on worker training responsibilities (and expenses) that employers are loathe to assume. It’s also easy to see how exaggerated job openings claims can be used to bolster arguments for more immigration – which of course is also a tempting strategy for keeping wages down by increasing labor supply relative to demand.

But even if such exaggeration is rife, why would it be so much more important in durable goods manufacturing than in the rest of the economy? Further, why would employers have any reason to overstate the number of vacancies they’re trying to fill if they believed that their businesses were being swamped by steep, tariffs-led costs increases, or were about to? Wouldn’t they be trying to shed payroll instead? As a result, it’s hard to escape the conclusion that the JOLTS openings numbers simply add to the evidence that, despite the claims of actual or impending tariffs-mageddon, metals-using industries continue to be faring just fine.

Interestingly, workers in durable goods sectors don’t appear to share this optimism fully, according to the JOLTS data. For the figures also measure the numbers of employees voluntarily leaving their jobs – a clear sign of confidence that lots of new opportunities are available. Here are are the April-through-September results:

private sector:     +8.53 percent

manufacturing:    -2.94 percent

durable goods:     -9.48 percent

Clearly, durable goods workers have been displaying less confidence about reemployment opportunities than their counterparts in the rest of manufacturing, and much less than private sector workers overall. And these results are mirrored in the August-to-September numbers:

private sector:     -1.26 percent

manufacturing:    -6.60 percent

durable goods:   -11.76 percent

Nonetheless, in absolute terms, all these quits levels – even for durable goods – remain pretty high by recent standards. And for durables, they’re somewhat volatile, possibly because the absolute numbers have always been on the small side. Indeed, durable goods quits increased by 6.19 percent month-to-month as recently as July. And the August-to-September drop-off was the biggest sequential decline in percentage terms since the 15.70 percent monthly nosedive in August, 2017 – after which the numbers of quits steadily recovered.

As always, these trends could change (or, with the quits rate) intensify. It’s also possible that the President’s more sweeping tariffs on imports from China will be game-changers. (The first round dates only from early July, and the second, much larger round, went into effect in mid-September.) For now, however, the only real news about the economic effect of these levies is that they’ve showed no signs of slowing the recovery’s current momentum. Accept no substitutes.

(What’s Left of) Our Economy: U.S. Private Sector Job Creation is Still Overstated, but its Comeback Continues

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government, health care services, Jobs, private sector, recovery, subsidized private sector, {What's Left of) Our Economy

Since we get a breather till the last week of the month in the flow of major nation-wide U.S. economic data, why not revisit one of my favorite unofficial measures of the American economy’s health? That’s the share of job creation that’s accounted for by what I call the subsidized private sector – those parts of the economy – notably healthcare services – that are officially classified as private sector industries, but that don’t really deserve the label because they depend so heavily (including for employment levels) on massive government subsidies.

This distinction matters, or should matter, because nearly all Americans rightly believe that the private sector, not the government, is the economy’s best hope for productive, sustainable growth. In turn, genuine private sector job creation is a much better gauge of the economy’s health than private sector job creation whose numbers are inflated by including the subsidized industries’ performance.

So I’m glad to report that the results for the first three-quarters of this year (through September) show the continuation of a trend I’d spotted a while ago: The subsidized private sector’s share of new total jobs and new private sector jobs is considerably lower so far during the Trump years than during Barack Obama’s presidency. At the same time, the subsidized private sector is still punching above its weight in terms of job creation, which isn’t such good news.

Let’s start, as usual, with 2013, since it was a year by which time the current economic recovery (which began in mid-2009) was well established. Conveniently, it also permits examining progress over a five-year period.

Between January and September, 2013, the subsidized private sector generated 11.14 percent of the economy’s total net new jobs created, and 10.83 percent of all the such jobs credited to the private sector as conventionally defined. The “real private sector,” meanwhile, produced fully 91.79 percent of the economy’s new hires, and 89.17 percent of the employment improvement placed in the conventional private sector category. (A drop in government employment accounts for the failure of these percentages to add up to 100.)

But what a change by 2016 – the last year of the Obama administration. During the first nine months of that year, the subsidized private sector’s share of total payroll increases had more than doubled – to 23.04 percent. And its share of all the conventional private sector jobs added during this period rose even faster – to 27.92 percent. Largely as a result, the real private sector accounted for only 59.43 percent of all net new U.S. employment. And the real private sector’s share of job gains credited to the conventionally defined private sector dropped to 72.06 percent.

So far this year, the subsidized private sector’s share of all U.S. job creation is down to 19.73 percent. The real private sector share of this total bounced all the way back to 76.27 percent, and its share of conventional private sector job gains was up to 79.44 percent.

But between 2017 and 2018, progress along these lines was much slower than during the previous year. In fact, when examined on a stand-still basis (different from the dynamic basis represented by the above employment change numbers), the subsidized private sector’s share of total U.S. employment actually has edged up over the last year – from 15.85 percent to 15.89 percent, and these industries’ share of conventionally defined private sector employment remained at 18.69 percent. 

With the subsidized private sector’s share of total job-creation this year nearly four percentage points higher (the 19.73 percent referred to in the previous paragraph), it’s clear that these industries keep creating an outsized share of overall new U.S. hiring.   

As always, please remember that I’m not portraying the subsidized private sector as worthless or only marginally important. Of course we need healthcare services in particular, and as the American population continues to age, we’ll continue to need a lot more. All I’m saying is that the nation needs to define its terms properly, and recognize that, without immense government spending (and the consequently greater debts), many of the jobs we’ve come to consider private sector jobs simply wouldn’t exist.

(What’s Left of) Our Economy: More Dreary U.S. Real Wages Results – & Manufacturing’s Long Pay Recession Continues

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

Today’s September real wage figures from the Labor Department show that, by this measure, Americans’ take-home pay advances remain surprisingly sluggish even as the official unemployment rate has reached recent historical lows, and that inflation-adjusted wages in manufacturing remain in a technical recession that began in January, 2016.

On a monthly basis, constant dollar hourly pay in the private sector rose by 0.28 percent – the best such performance since March (when the rate was fractionally higher). The initially reported August sequential increase of 0.09 (which is still preliminary) was unrevised. (Like the Labor Department, I don’t try to track real wage trends in the public sector because that compensation is based largely on politicians’ decisions, not economic fundamentals.)

Year-on-year, the private sector’s after-inflation wage change wasn’t anything to write home about, either. Such pay was up by only 0.46 percent. On the one hand, that number represented the strongest annual growth since January’s 0.66 percent. On the other hand, it was lower than the increase between the previous Septembers – 0.56 percent.

As has long been the case, manufacturing’s pay numbers were far weaker. On a monthly basis, its real wages dipped by 0.09 percent. As a result, constant dollar wages in the sector are now 0.28 percent lower than they were in at the beginning of 2016 – a 32-month stretch that more than qualifies as a technical recession – a period of two or more consecutive quarters of cumulative decline. In addition, the real manufacturing wage flat-line between July and August was unrevised.

The dimensions of manufacturing’s wages woes are also clear from the year-on-year results. In September, the sector’s real wages were down 0.92 percent from the previous September’s level. And that wasn’t even manufacturing’s worst such performance in recent months. Between September, 2016 and 2017, real manufacturing wages decreased by only 0.09 percent.

To add insult to injury, since the current economic recovery began – more than nine years ago, in mid-2009 – real private sector wages have risen by a far-from stellar 4.85 percent. Yet even such a meager advance is more than 25 times faster than the after-inflation wages growth for manufacturing – a rounding error-like 0.19 percent.

P.S. Somewhat disturbing for President Trump and Republicans generally – these are the last real wage figures that will be released before next month’s midterm elections.

(What’s Left of) Our Economy: An End to the Private Sector’s Real Wages Recession, but Manufacturing’s Drags On

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

The inflation-adjusted wages situation in the United States has gotten so bad that the only good news contained in this morning’s Labor Department report on the subject was that real private sector hourly pay has now flat-lined since July, 2017. It’s good news because it means that in August its workers exited a real wage recession (a cumulative decline lasting two quarters or more) that they’d experienced starting last July.

Otherwise, by this key measure, American workers’ paychecks remained in the doldrums. For the private sector, constant dollar wages inched up by 0.09 percent between July and August, and year-on-year, they rose by only 0.19 percent. Between the previous Augusts, real private sector wages had increased by 0.65 percent.

Moreover, since the current economic recovery began – more than nine years ago – inflation-adjusted private sector wages have advanced by a mere 4.56 percent.

All the same, these pay improvements have been positively roaring when compared with developments in manufacturing. American industry remained in its real wage recession in August, with price-adjusted hourly pay down by 0.19 percent since January, 2016.

On a monthly basis, real manufacturing wages were flat in August, and year-on-year, they fell by 0.92 percent. Real manufacturing wages were off from August, 2016-August, 2017 as well, but by a mere 0.09 percent.

Perhaps worst of all, over the current nine-plus year old economic recovery, constant dollar manufacturing wages have risen by only 0.28 percent – less than a fifteenth as fast as real private sector wages.

(What’s Left of) Our Economy: The Rest of the Story on August’s Manufacturing Jobs Figures

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Jobs, Labor Department, manufacturing, non-farm employment, private sector, real wages, wages, {What's Left of) Our Economy

Although the continued strong job growth in most metals-using industries since the Trump tariffs was the most important takeaway from Friday’s latest monthly official U.S. jobs report (for August), it certainly wasn’t the only important manufacturing employment news. So here are some of the other highlights (or lowlights) of the Labor Department release worth noting.

As I wrote Friday, the 3,000 sequential drop in manufacturing’s payrolls in August was the sector’s first monthly dip since July, 2017. And worse, the revisions (which were weak for the entire economy as well), cut the estimates of July and August net jobs gains nearly in half.

As a result, whereas July’s year-on-year manufacturing jobs increase was previously pegged at 327,000, the newest estimate (which is still preliminary) is only 296,000. Yet it’s still the best such advance since May, 1995 (297,000), which ain’t beanbag. Less impressive, though, the August annual increase (which is also preliminary) was lower still (254,000). On the other hand, it still represented a major pickup from between the two previous Augusts (116,000).

The August monthly slip and the downward revisions also slowed manufacturing’s progress in accounting for a growing share of overall non-farm employment (the Labor Department’s U.S. jobs universe).

As of the July jobs report, this share had risen to 8.55 percent – a decided improvement from the 8.47 percent figure from July, 2017. But now the July, 2018 number has been downgraded to 8.53 percent, and August’s dropped to 8.52 percent. As a result, although manufacturing employment has still been growing faster than overall American employment during the Trump administration (in February, 2017 – the President’s first full month in office, it stood at 8.49 percent of non-farm jobs), the degree of out-performance is less than previously judged.

Over the longer term, manufacturing’s status as an employment laggard is much clearer. Since it hit its latest bottom, in February and March, 2010, domestic industry has regained 1.264 million (55.12 percent) of the 2.293 million net new jobs it had lost during the Great Recession and its aftermath. All the same, its payrolls are still 7.49 percent below where they were when the recession officially began, at the end of 2007.

By contrast, the private sector overall lost 8.785 million jobs from the recession’s onset through its employment bottom in February, 2010. Since then, employment has grown by 19.689 million. And there are now 9.40 percent more private sector jobs than there were at the end of 2007.

But although the August jobs report altered the recent manufacturing jobs story somewhat, the discouraging manufacturing wages story remained fully intact. On a sequential basis, pre-inflation wages for the overall private sector increased by 0.37 percent, versus 0.22 percent for manufacturing workers. And on an annual basis, such current dollar private sector pay rose 2.92 percent for the private sector (its best such performance since May, 2009), but only a 1.80 percent improvement for manufacturing workers (the best such performance since January).

In fact, since the current economic recovery began in mid-2009, pre-inflation manufacturing wages are up 17.64 percent. For the private sector overall, they’ve risen by 22.67 percent.

In inflation-adjusted terms, manufacturing’s wages performance during the recovery is even worse. The latest data go up only through July, but they show that, since mid-2009, real private sector wages have risen by 4.46 percent. The increase for manufacturing workers has been only 0.28 percent – less than one-fifteenth as fast.

Yet as suggested by these meager price-adjusted improvements, both the private sector overall and manufacturing have turned in dismal wage performances. In fact, both remain in real wage recessions – i.e., stretches of two straight quarters or more where hourly pay has declined on net. For the entire private sector, after-inflation wages are down by 0.09 percent since July, 2017. For manufacturing, they’re off by 0.19 percent since January, 2016.

(What’s Left of) Our Economy: The New Jobs Report Shows that the Metal Tariffs Sky Keeps Not Falling

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aluminum, core capex, Jobs, Labor Department, manufacturing, metals tariffs, metals-using industries, private sector, steel, tariffs, Trade, {What's Left of) Our Economy

This is getting just embarrassing. Economists and mainstream media reporters and pundits keep claiming that President Trump’s metals tariffs are already damaging the U.S. economy – and especially industries that heavily use the steel and aluminum that have become more expensive because of the levies on imports of those goods. (Here’s a new example.)

And the most authoritative data available keep demonstrating that these claims so far are absolute hokum. (See this RealityChek column for a summary and relevant links.) The latest evidence: this morning’s August jobs report from the Labor Department. It shows emphatically that those metals-using sectors have mainly created net new jobs at a faster pace than domestic manufacturing overall, and that several have boosted payrolls more rapidly than the entire private sector (including service industries that are not heavy metals users).

Here are the numbers showing the relevant rate of employment changes from April (the first full month in which the metals tariffs were in effect) through both July (where they stood as of the previous monthly jobs report) and through August:

                                                       thru July                        thru August

entire private sector:                 +0.53 percent                   +0.64 percent

overall manufacturing:              +0.73 percent                   +0.47 percent

durable goods:                          +0.96 percent                   +0.57 percent

fabricated metals products:      +1.10 percent                   +1.17 percent

non-electrical machinery:         +1.43 percent                   +1.04 percent

automotive vehicles & parts:    +1.06 percent                  -1.08 percent

household appliances (thru June): -0.63 percent           +0.16 percent (thru July)

aerospace products & parts (thru June): +1.05 percent  +2.03 percent (thru July)

 

There have been some shifts within this list. But with the exception of automotive, no metals-using sector has slacked off more than manufacturing as a whole, and three of these industries (fabricated metals products, appliances, and aerospace) have picked up the pace. And even the metals-using durable goods super-sector as a whole didn’t fade much more on the employment front than manufacturing overall.

In addition, yesterday’s official business investment numbers confirmed that, through July, new orders for core capital goods (such machinery and equipment minus demand for defense and the volatile numbers for aircraft) have now advanced sequentially for four straight months. Since “core capex” is rightly viewed as the economy’s best proxy for business’ confidence in its future prospects, these results stuck a new fork in the narrative that the Trump tariffs would vitiate such spending by boosting that predominant bugaboo of corporate planning – uncertainty.

The new jobs report did contain some disquieting news for domestic manufacturing. Payrolls fell on month in August (by 3,000) for the first time since July, 2017. And the revisions pretty much cut the previously reported impressive June and July gains in half. (The new July increase of 18,000 is still preliminary.)

But today’s employment release also made clear that, after several months of metals tariffs, the fears about their impact are no more than fears. Why is that not considered newsworthy?