(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: 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.

Im-Politic: Has Trump’s Record on Real Wages Been Good Enough Politically?

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Barack Obama, China, Im-Politic, inflation-adjusted wages, Labor Department, manufacturing, private sector, real wages, tariffs, Trade, trade war, Trump, wages

Given the on-again-off-again nature of President Trump’s tariff policies (which against China went partly off again yesterday in the form of an announced short delay in the imposition of $250 billion worth of levies originally set for October 1), I figured there was no sense in performing my now-standard analysis of this morning’s new monthly U.S. consumer price inflation figures (for August).

Instead, I’ll focus on today’s inflation-adjusted wage data – which is always released by the Labor Department in tandem with the consumer inflation report –  and here there’s definitely some good news for President Trump, his supporters, and for manufacturing workers. One notable qualification: The shorter the memories of Trump working class voters, the better for his political future.

The table below makes clear what I mean. It shows the price-adjusted wage changes for the last three January-thru-August periods for private sector workers overall, for “blue-collar” private sector workers (that is, those not in management or supervisory positions), for manufacturing workers overall, and for blue-collar workers in general and their manufacturing counterparts. (To remind:  The Labor Department doesn’t track wages for public sector employees, since their pay stems mainly from politicians’ decisions, not economic fundamentals.) 

January thru Aug. real wages                  2019                2018                 2017

private sector:                                 +0.55 percent   +0.75 percent    +0.94 percent

private sector blue-collar:               +1.27 percent   +0.76 percent   +0.76 percent

manufacturing:                               +0.65 percent     -0.19 percent   +0.46 percent

manufacturing blue-collar:            +0.23 percent         0 percent      +1.15 percent

As you can see, manufacturing workers in particular have seen January-through-August constant-dollar wage gains in 2019 that were much better than in the comparable last year – but largely because the 2018 results were terrible. Moreover, for blue-collar manufacturing workers, the 2019 improvement was still much weaker than the 2017 increase. Private sector blue-collar after-inflation hourly wages accelerated year-on-year in 2019 as well, but the 2018 gain was at least identical to 2017’s.

Short blue-collar worker memories will also help Trumpworld if the Obama administration’s real wage record is forgotten. For Mr. Trump’s record trails that of his predecessor for all of these major worker categories (although the advance in inflation-adjusted manufacturing blue-collar wages under both Presidents during comparable periods of their terms in office is pretty similar).

                                                   Last 30 Obama months       First 30 Trump months

private sector:                                  +3.39 percent                      +2.62 percent

private sector blue-collar:               +3.97 percent                      +2.72 percent

manufacturing:                                +3.25 percent                     +0.37 percent

manufacturing blue-collar:              +3.22 percent                     +3.11 percent

Let’s end on a fairly positive note for Mr. Trump and his backers: The table below shows that overall, price-adjusted wages in manufacturing fared better after his tariffs’ advent in March, 2018 (for the most part) than during the pre-tariff phrase of his presidency. Because the two time periods have been of different lengths, I’m presenting the results in terms of average monthly changes in absolute dollars and cents terms.

                                                         Pre-tariffs                            Post-tariffs

Manufacturing:                               -0.31 cents                           +0.50 cents

Blue-collar manufacturing:           +0.85 cents                            +0.75 cents

Again, what these statistics mean for the future of American workers is anyone’s guess, especially in trade-heavy manufacturing, since trade policy decisions seem so ragged. And politically, the key question remains: Have times been good enough for working class and other voters during the Trump era to offset other concerns about his leadership sufficiently to bring him a second term?

(What’s Left of) Our Economy: The New Jobs Report’s Wage Details are Mixed, Too – Economically and Politically

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

The latest U.S. government report on the nation’s employment picture (for August) produced unusually mixed jobs results. (See, e.g., this report.) Maybe that’s why analysts seem to have missed one of its more encouraging takeaways: Hourly wages in the manufacturing sector, which have remained weak throughout the current economic expansion and into the Trump era, have picked up notably so far this year.

Yet the new data also make clear that, when it comes to the gap between U.S. blue-collar workers’ in the private sector overall and those of their better paid white-collar counterparts, the former have lost some ground under the Trump administration, even though their hourly wages are up in absolute terms.

So for a President who’s going to run for reelection largely as a populist champion of forgotten Americans, the August results were unusually mixed as well. 

That manufacturing-specific pickup has taken place in pre-inflation wages, and we won’t get the latest constant dollar figures until this coming Thursday. But the progress before adjusting for price changes (and don’t forget – inflation has been awfully low lately) has been so notable that, for now, manufacturing wages’ performance is no longer worsening in comparison with the trends in the overall private sector. Indeed, the gap has narrowed a smidge.

Chiefly, from this January through August, current dollar manufacturing wages are up 2.09 percent. That’s the best such increase since 2008 (2.44 percent) – when the economy was still mired in recession, and employers’ tendency to jettison less experienced and thus more poorly paid workers produced a statistical wage increase for the remaining manufacturing workforce.

Moreover, this improvement was slightly faster than the two percent rise achieved by the private sector overall – also the best such performance since 2008 (2.36 percent). (This Labor Department wage series only goes back to 2006.)

The story is similar for blue-collar workers in both manufacturing and the private sector overall. (Data for these wages in the overall private sector goes back all the way to 1964 and for manufacturing to 1939.) For blue-collar manufacturing workers (called “production and nonsupervisory employees” by the Labor Department), January-through-August pre-inflation hourly pay is up 1.74 percent. That’s of course less than for the manufacturing workforce as a whole, but it’s the best such number since 2016 (1.98 percent) and, perhaps more important, the second best since 2006.

For the overall private sector, current-dollar blue-collar wages have advanced by 2.08 percent between January and August of this year. That’s their best such performance since 2008’s 2.48 percent.

As a result, from the beginning of the current economic recovery (mid-2009) this August, overall pre-inflation private sector wages had risen 1.2906 times faster than comparable hourly pay in manufacturing. That’s ever-so-slightly slower (but still slower) than the ratio through last August (1.294 times faster).

Manufacturing’s relative improvement was greater for blue-collar workers. From the mid-2009 beginning of the current economic recovery through this August, private sector nonsupervisory etc current dollar hourly wages have risen 1.2131 times faster than blue-collar manufacturing wages. That’s a smaller gap than the 1.228:1 ratio from the recovery onset through last August.

Nonetheless, the data show that, after narrowing slightly under former President Obama, the pre-inflation hourly wage difference between blue-collar and white-collar workers overall has been growing slightly again under President Trump.

When the recovery began, in mid-2009, private sector production and non-supervisory workers’ hourly wages were 83.83 percent of the wages earned private sector workers overall. By January, 2017 – the last Obama month in office, this figure had grown to 83.99 percent. As of this August, however, it’s back down to 83.92 percent.

Interestingly, the Trump record looks better when only the manufacturing trends are examined. In mid-2009, blue-collar manufacturing wages stood at 78.93 percent of manufacturing wages overall before inflation. By January, 2017, the share had dipped to 78.25 percent. The latest statistics show that it’s grown to 79.88 percent.

None of these changes is anywhere close to dramatic – a timely reminder, as a presidential campaign year rapidly approaches, that the U.S. economy really is akin to a supertanker, and barring sudden catastrophes or windfalls, typically takes a frustratingly long time to turn significantly.

(What’s Left of) Our Economy: The Trump Effect on U.S. Manufacturing Workers

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blue-collar workers, election 2020, inflation-adjusted wages, Jobs, manufacturing, Obama, real wages, Trump, wages, {What's Left of) Our Economy

There’s no question that President Trump has compiled a solid record when it comes to boosting American manufacturing employment, and the numbers look especially good compared with that of his predecessor, Barack Obama.

Wages, though? They remain another story entirely, and keep raising the question of how convincingly during his reelection campaign the President will be able to portray himself as a godsend to U.S. industry’s workers.

According to the most valid comparison that can be made to date, during the 29 months since Mr. Trump settled into the Oval Office (February, 2017), overall manufacturing employment and blue-collar manufacturing employment are both up considerably faster than during the last 29 months of the Obama administration. Here are the specific percentage gains for the manufacturing sector overall, and for industry’s non-supervisory and production workers – often informally dubbed “blue-collar workers”:

                                                Last 29 Obama months        First 29 Trump months

Manufacturing:                            +1.31 percent                        +3.86 percent

Blue-collar manufacturing:         +0.92 percent                         +3.40 percent

But the average hourly wage figures adjusted for inflation actually flip these results on their head:

                                              Last 29 Obama months          First 29 Trump months

Manufacturing:                           +3.05 percent                           -0.09 percent

Blue-collar manufacturing:         +3.22 percent                          +2.31 percent

It’s true that manufacturing’s blue-collar workers during the Trump era so far have been faring far better than their supervisors (who remain better paid in absolute terms). But the price-adjusted paychecks are growing significantly more slowly than they were during the final Obama years.

Of course, this politics-centric post on manufacturing wouldn’t be complete without discussing how President Trump’s tariffs have affected the picture. And here the script is arguably flipped once again to some extent, at least during the Trump years alone. The table below shows the average monthly jobs gains recorded for manufacturing and blue-collar manufacturing before the first metals tariffs were imposed (March, 2018) and after. Since the time frames differ somewhat, I thought the monthly averages would illustrate the trends more clearly.

                                                   Pre-tariffs                                  Post-tariffs

Manufacturing:                            17.38K                                       15.07K

Blue-collar manufacturing:         11.54K                                           8.6K

After the tariffs, the pace of manufacturing employment increases slowed somewhat, but it slowed much faster for blue-collar manufacturing workers.

Now for the wages results, presented as the average monthly changes in absolute (dollars and cents) terms:

                                               Pre-tariffs                                     Post-tariffs

Manufacturing                        -3 cents                                         +2 cents

Blue-collar manufacturing    +8 cents                                          +5 cents

In sum, after-inflation hourly pay rose slightly after the trade curbs came on after having fallen beforehand. Real wages for blue-collar manufacturing workers rose during both periods, but more slowly after the tariffs.

These results indicate that the President can make a decent case that his administration, and even his tariffs, have helped manufacturing workers on balance. But on the pay front in particular, the story gets complicated – and the kind of rhetorical precision Mr. Trump will need to display to date in order to tout these achievements credibly doesn’t seem to be one of his strong suits.

(What’s Left of) Our Economy: Weak Real Wage Increases Under Trump Now Look Only a Little Less Weak

Tags

Bureau of Labor Statistics, Democrats, election 2020, inflation adjusted wages, manufacturing, private sector, real wages, Trump, wages, {What's Left of) Our Economy

Those same new official U.S. inflation statistics that reveal how President Trump’s tariffs have or haven’t affected consumer prices can also show whether American workers’ paychecks have been keeping up with the (slowly) rising cost of living. And the latest Bureau of Labor Statistics (BLS) data contains some good news for the nation’s employees, for its manufacturing workers in particular, and as a result for President Trump – although mainly in comparison to inflation-adjusted wages’ lackluster previous performance during his administration.

According to the new real wage figures (which bring the story up to June), price-adjusted pay for workers in the private sector overall rose by 0.18 percent sequentially last month – about in line with the results for the last few months. The year-on-year numbers, though, were much better. Price-adjusted wages improved by 1.49 percent between June, 2018 and June, 2018 – compared with their bare 0.09 percent increase between the previous Junes. (The BLS doesn’t look at government workers’ pay because that’s largely the result of politicians’ decisions, and thus says little about the state of the national labor market.)

The only fly in this ointment: This year so far, annual advances in private sector wages have lost some momentum. The June year-on-year rise was somewhat lower than its January counterpart (1.68 percent).

Real wages in manufacturing lately have made better progress, reversing a trend that’s held until very recently. On a monthly basis, they were up 0.19 percent in June, slightly better than the increase for the private sector generally. The June annual rise of 0.64 percent was less than half the overall private sector figure, but was much better than the change between June, 2017 and June, 2018. Yet that’s only because during that period, real manufacturing wages actually fell by 1.10 percent.

And over longer time periods, the manufacturing results have been similarly mixed compared with the trends for private sector wages generally. For instance, during this calendar year so far, the advance in real manufacturing wages has been more than twice as fast as that for all private sector workers – 0.37 percent to 0.18 percent. Alternatively put, whereas the annual gains in real private sector wages have slowed since January of this year, the 0.64 percent June figure for manufacturing represents a major acceleration from January’s 0.09 percent rate.

Constant dollar manufacturing wages have even closed the immense gap that opened earlier during the current economic recovery with overall private wages.

From the mid-2009 beginning of the ongoing economic expansion (American history’s longest ever) to this June, after-inflation manufacturing pay is up only 1.03 percent in toto versus the 6.01 percent increase for the overall private sector. In other words, the real private sector wage improvement, however modest in and of itself, has been 5.83 times faster.

As of the previous June, however, the gap was 12.05 to one – more than twice as great.

Nevertheless, when it comes to real wages, President Trump still faces a big political problem: Under his administration so far, they’ve risen much more slowly than during the most comparable Obama administration period, both for the private sector overall and especially for manufacturing.

Specifically, during the first 28 months of President Trump’s tenure, after-inflation private sector wages have increased by only 2.25 percent in all, and real manufacturing wages have inched up only 0.09 percent. During the last 28 months of the Obama administration, these numbers were 3.09 percent and 3.52 percent, respectively. If the real wage increases and the private sector-manufacturing gap don’t start getting considerably better soon, expect to hear a lot about such numbers from smart Democrats as the 2020 election approaches.

(What’s Left of) Our Economy: Real Wages Remain a Trump Economy Weakness

Tags

Barack Obama, blue-collar workers, Employment-Population ratio, inflation adjusted wages, Labor Force Participation Rate, manufacturing, non-supervisory workers, private sector, production workers, real wages, slack, Trump, wages, {What's Left of) Our Economy

As I’ve written repeatedly, I’m convinced that the economic data conclusively show that the U.S. economy on numerous fronts has kicked into a higher gear during the Trump years. But last week’s inflation-adjusted wage figures are an important reminder of one big exception: American workers’ price-adjusted take- home hourly pay.

Indeed, by every relevant measure, these real wages during Mr. Trump’s first 27 months as President have been rising at a pace slower than that during his predecessor Barack Obama’s final 27 months in office. Ditto for manufacturing workers, whose fortunes have been such a Trump focus.

And the comparison flatters Obama even when the data for blue-collar workers – generally the lowest paid members of the American workforce – are stripped out, although in absolute terms the Trump-era performance here has been somewhat better.

Here are the percentage changes through May. (In the lingo of the Bureau of Labor Statistics, which tracks these numbers, blue-collar workers are “production and non-supervisory workers.”  And as usual, public sector workers are excluded because their pay levels are overwhelmingly determined by politicians’ decisions, and thus say little about the fundamentals of the economy or the job market.)

                                     m/m        y/y   1^st 27 Trump months  last 27 Obama months

private sector:            +0.18     +1.30              +2.06                         +3.00

manufacturing:          +0.28     +0.46               -0.09                         +2.96

private production:    +0.32     +1.73              +2.29                         +3.27

mfg production:        +0.23     +1.03              +2.08                          +2.73

These results continue to be especially surprising given overall unemployment rates that have been at multi-decade lows – which should be forcing wages up, as employers find themselves forced to offer higher pay in order to compete for increasingly scarce workers. And although, as I’ve written, it’s possible that manufacturers in particular have held the line on wages because they’re not able to find workers with anything close to the skills they need, I wonder how understanding such workers will be about this explanation when it comes time to vote for President in 2020.

At the same time, here’s what’s not open to debate: Despite the plunge in the unemployment rate, other measures – notably the Employment-Population ratio and the Labor Force Participation Rate – show that there’s plenty of slack left in the U.S. labor market. If politicians and business leaders really want to see real wages rise healthily again, they’ll need to figure out how to lure able-bodied Americans still on the sidelines back to work.

(What’s Left of) Our Economy: Real Wages are Still Far from Great Again – Especially in Manufacturing

Tags

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

No doubt about it – this week’s government report on U.S. real wages was a dog. (No offense to canine lovers – of which I’m one!) And the news, as usually the case, was particularly bad for manufacturing workers, as their inflation-adjusted hourly pay in March dipped back into technical recession territory. That is, their real wages are down on net since January, 2016 – a much longer time-span than the two straight quarters of cumulative growth contraction that comprise most economists’ definition of a recession.

Manufacturing’s real wage recession returned thanks largely to a sizable 0.65 percent sequential drop between February and March. That was the worst such deterioration since November, 2011’s 0.95 percent. The only consolation for manufacturing workers – the decrease followed a 0.56 percent monthly improvement in February. That was the best such performance since August, 2015’s 0.57 percent.

But underscoring manufacturing’s real wage problems was the March year-on-year decline. It was only 0.09 percent. And the rate of decrease was slower than that between the previous Marches – 0.46 percent. All told, however, such price-adjusted hourly compensation in industry is now down by that 0.09 percent figure for more than three years.

Moreover, manufacturing’s real wage performance remains much worse than for the private sector as a whole. (These after-inflation wage analyses omit the numbers for public sector workers’ because their pay largely reflect politicians’ decisions, not the workings of free market forces. In fact, the Bureau of Labor Statistics, which compiles and publishes these figures, doesn’t even track real wages for government employees.)

Private sector workers overall didn’t enjoy a great hourly pay month in March, either. Their constant dollar wages fell sequentially by 0.27 percent – the first such decline since October’s 0.09 percent, and the biggest since February, 2013’s 0.49 percent. Moreover, the private sector’s monthly wage performance can’t be explained by good February numbers – since that month they were only up by a so-so 0.18 percent.

Yet private sector real wages in March were 1.21 percent higher than in the previous March, which continued a solid run for this indicator. And the new March year-on-year figure was considerably better than that between the previous Marches – 0.47 percent.

The manufacturing-private sector real wage comparison looks even worse when their changes during the course of the current recovery are examined. Since mid-2009, after-inflation private sector hourly wages are up 5.72 percent. That’s hardly gangbusters. But it’s a pace more than ten times faster than that for manufacturing – a barely detectable 0.47 percent.

More discouraging for the manufacturing sector: That gap has been widening. From the onset of the current recovery through March, 2018 overall real private sector wages had risen about 7.8 times faster than real manufacturing wages. Through this past March, the exact size of that growth difference was 12.2 times faster.

I’m still convinced that at least some of manufacturing’s relatively bad recent real wage performance (despite strongly growing payrolls) stems from the unusually low quality of workers the sector has needed to attract lately. But as the next presidential election approaches, what I think matters even less than usual, at least politically. The big question is whether the manufacturing workers who turned out for President Trump will be satisfied with this explanation.

(What’s Left of) Our Economy: Manufacturing’s Real Wage Recession Hits Third Birthday

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

As I’ve written previously, I’m becoming convinced that badly lagging wages for U.S. manufacturing workers stem in part from companies inevitably hiring less and less qualified workers who need lots of time and training to get up to snuff. But that doesn’t mean I have to be overjoyed about it.

So although I remain hopeful that these hiring practices will eventually produce the kind of highly skilled and productive manufacturing workforce the country needs, it seems justified to point out that last week’s Labor Department report showed industry’s inflation-adjusted wages nearing historically awful territory – certainly for an economy that’s expanding. 

The worst news (and the competition was keen): Manufacturing’s real wage recession got longer at both ends. Because constant-dollar hourly pay fell by 0.37 percent on month in January (the worst sequential performance since last August, 2017’s 0.64 percent drop), the downturn not only extended another month. It also pushed back the start date to January, 2016.

In other words, the manufacturing real wage recession just turned three years old. During that period, after-inflation hourly pay has declined by a cumulative 0.09 percent.

Some more (depressing context): If you go back further in the figures, you see that real manufacturing wages haven’t budged at all since February, 2009. That’s nearly ten years of outright stagnation.

In fact, since the current economic recovery began, in mid-2009, inflation-adjusted manufacturing wages have risen by only 0.47 percent.

If you’re desperate for a silver lining, here’s the only one I could find. Manufacturing’s year-on-year real wage decrease was slightly less (0.09 percent), than that between the previous Januarys (0.19 percent). So technically, that’s progress.

Real wage gains for the overall private sector continued to outpace those in manufacturing by a wide margin, especially the longer the time period you examine. On a monthly basis, the private sector’s 0.46 percent December price-adjusted pay hike was revised down to 0.37 percent. But that still beat manufacturing’s (0.37 percent). The same holds for January – when private sector wages after inflation climbed by another 0.18 percent.

On annual basis, the private sector left manufacturing in the dust, real wage-wise. Its January-January 1.68 percent improvement was its best since July, 2014’s 1.81 percent. Moreover, it nearly tripled the constant dollar wage increase of 0.66 percent between January, 2017 and January, 2018.

Worse still, since the current recovery began, real private sector wages are up 5.82 percent. Although not an eye-popper, given that it represents the change over more than nine years, this rate of increase was 12.38 times faster than its manufacturing counterpart – 0.47 percent.

Even worse, the gap is widening. During the recovery through last January, real private sector wages had only risen 7.27 times faster than real manufacturing wages.

If you believe the low-skills explanation for the manufacturing wages’ dismal performance in absolute and relative terms, you could legitimately hope that training and education can turn the picture around. At the same time, if you’re a low-paid manufacturing worker, you could legitimately wonder how much longer some payoff of more knowledge and experience will take.

Following Up: More on Those Great New U.S. Manufacturing Jobs Figures

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Following Up, inflation-adjusted wages, Jobs, Labor Department, manufacturing, real wages, Trump, wages

Friday’s post focused on what the new U.S. jobs report that morning (containing December data) revealed about the Trump tariffs’ impact so far on domestic American manufacturing. (Overwhelmingly, they’ve done no harm.) But it’s also worth noting other industry-related highlights of this Labor Department release – and highlights they were.

First, the headline figure (32,000 net new manufacturing jobs created on-month in December) was the best such performance since last December’s 39,000. And the total revisions for October and November together added 3,000 jobs to the results for those two months. (The November and December figures are still preliminary. Further, starting next month, the Labor Department will start publishing revisions of the key data back to January 2014 – which will further change yesterday’s findings.)

Partly as a result of the last few months’ numbers, 2018 stands preliminarily as the best year for U.S. manufacturing job creation (284,000) since 1997 (304,000). The previous December-to-December manufacturing employment gain was 209,000.

Also, manufacturing jobs as a share of total non-farm jobs (the Labor Department’s definition of the total U.S. employment universe) rose to just under 8.55 percent – their highest level since July, 2016 (8.56 percent). At the start of the Trump administration (February, 2017 was its first full month in office), this figure stood at 8.49 percent. In other words, manufacturing payroll growth has been faster than overall payroll growth under President Trump.

Even so, manufacturing’s prior relative employment creation has been so weak that the sector still remains a laggard on this front for the recovery era as a whole.

Since bottoming out in February and March of 2010, manufacturing has regained 1.389 million (60.58 percent) of the 2.293 million jobs it had lost during the Great Recession and its aftermath. Overall private sector employment sank by 8.785 million during the downturn, but since then has regained 20.608 million jobs.

Manufacturing keeps trailing the overall private sector on the pay front, too. In December, pre-inflation manufacturing wages rose by 0.26 percent – considerably slower than the overall private sector’s 0.40 percent.

Year-on-year, current-dollar manufacturing wages are up by 1.98 percent – their best such performance since September, 2017 (2.18 percent). Between the previous Decembers, manufacturing hourly pay before inflation has advanced by 1.75 percent. But overall current-dollar private sector wages improved by 3.15 percent year-on-year in December.

In fact, since the current recovery began, in mid-2009, pre-inflation manufacturing wages have improved by only 18.60 percent. Overall private sector wages are 24.12 percent higher.

Moreover, the gap has been widening. The above figures show that, as of the latest data, private sector wages had grown 29.68 percent faster than manufacturing wages. As of the previous December, the difference was 24.80 percent.

Manufacturing’s pay performance looks even worse after adjusting for inflation. The latest data are from November – when manufacturing’s sequential increase (0.37 percent) actually topped that of the private sector (0.19 percent). (December’s won’t be published until the middle of this month.) But the November figures also show that, whereas private sector wages inched up year-on-year by 0.84 percent, manufacturing paychecks actually dipped by 0.27 percent.

Indeed, real manufacturing wages are cumulatively down by that amount since February, 2016 – meaning that, technically, they remain mired in a long recession (two or more date quarters of net deterioration).

Moreover, during the current economic recovery, inflation-adjusted manufacturing wages have risen less than a tenth as fast (0.47 percent) as private sector wages (4.95 percent). And the gap has widened significantly over the past year, when it stood at a 0.75 percent real wage increase for manufacturing versus a 4.07 percent rise for the private sector overall.