(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.

Advertisements

(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

Tags

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

Tags

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.

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

Tags

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: More Dreary U.S. Real Wages Results – & Manufacturing’s Long Pay Recession Continues

Tags

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

Tags

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

Tags

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: More Historically Bad Wage News for U.S. Manufacturing Workers

Tags

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

This morning’s real wage data from the Labor Department contained a double dose of bad news for American workers – and in one case, historically bad news.

Just as with a main finding from the pre-inflation wage data released earlier this month along with the monthly Labor Department jobs report, today’s after-inflation figures showed that hourly wages for manufacturing workers fell behind those of private sector workers in general for the first time – at least on a preliminary basis – on record. (These figures for each category of workers were first released in March, 2006).

To achieve this result, price-adjusted hourly pay for private sector workers in July stayed unchanged month-on-month (at $10.76), while such pay for manufacturing workers dipped by 0.09 percent (to $10.75). Price-adjusted wages for the two groups of workers first converged in May at $10.75.

When the initial set of these real wage figures was released more than twelve years ago, constant dollar manufacturing wages exceeded constant dollar overall private sector wages by 3.19 percent.

The new Labor Department data also showed that technical real wage recessions (periods of cumulative decline lasting for two consecutive quarters or more) for both groups of workers continued through July.

In manufacturing, inflation-adjusted wages are down on net by 0.19 percent since January, 2016 – a period of more than two-and-one-half years. In the private sector generally, the real wage recession became one year old, as after-inflation hourly pay is now down 0.19 percent on net since last July.

Manufacturing’s real wage woes were also made clear in its latest year-on-year figures. Since last July, such pay is down 1.56 percent – the worst such annual performance since October, 2012’s 2.09 percent plunge. Between the previous Julys, industry’s real wages grew by 0.65 percent.

In the private sector overall, the newly reported July annual real wage decline of 0.19 percent also contrasts with its own 0.65 percent advance the year before.

During the current economic recovery, which began in mid-2009, real private sector wages are up 4.36 percent. But in the private sector, they’ve improved by only 0.28 percent during this more than nine-year stretch – less than one-fifteenth as fast.

(What’s Left of) Our Economy: America’s Real Wage Recession Drags On – Especially in Manufacturing

Tags

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

In one sense, President Trump’s summit with North Korean dictator Kim Jong Un was well-timed – it’s inevitably distracting attention from the latest set of real wage figures (for May) released this morning by the Labor Department. The big takeaways: On a monthly basis, Americans’ inflation-adjusted hourly pay keeps going nowhere, and in fact, constant dollar wages for both the entire private sector and for manufacturing remained in technical recession. That is, they’re down on net for two straight quarters or more of economic activity.

The new data show that, for the private sector overall, real wages inched up sequentially by 0.09 percent in May after flat-lining in April. For manufacturing workers, they fell for the second straight month, with April’s 0.09 percent dip followed by a 0.19 percent drop in May.

As a result, on an annual basis, after-inflation private sector wages are unchanged, and such pay in manufacturing is off by 1.20 percent. Between the previous Mays, real wages in the private sector rose by 0.66 percent, and in manufacturing by 0.28 percent.

The new May statistics reveal that the private sector has been enduring a real wage recession since last June, as constant dollar hourly pay has declined by a cumulative 0.09 percent since then. As for manufacturing, its real wage recession dragged into its 28^th straight month, with price-adjusted hourly wages down by 0.28 percent since January, 2016.

Just as worrisome, real wages in manufacturing are nearing the point of complete stagnation during the current economic recovery. Since mid-2009, they’ve advanced only by a barely perceptible 0.19 percent. The private sector’s performance during this period is only decent by comparison: It’s after-inflation hourly pay has risen by 4.27 percent during this nearly nine-year expansion.