(What’s Left of) Our Economy: December Shows Continuing Manufacturing Job Gains but Returning Wage Woes

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Employment, Jobs, manufacturing, manufacturing renaissance, wage inflation, wages, {What's Left of) Our Economy

Manufacturing reenforced its recent good job gains in December, adding 17,000 net new positions on top of upwardly revised October and November improvements. The sector’s employment, moreover, now stands at its highest level since February, 2009. But manufacturing’s share of total U.S. employment remained at its historic low, and current dollar wages fell in December month-to-month for the third time this year. Moreover, inflation-adjusted gains for November (the latest available figures) were much too small to affect the sector’s lagging performance.

Here’s my detailed analysis of the manufacturing employment picture based on this morning’s December monthly employment report from the Bureau of Labor Statistics, plus the Bureau’s interactive historical database (which you can access here):

>Today’s December manufacturing jobs figures provided further evidence of the sector’s recovery from a summer employment slump. In addition, to industry gaining 17,000 jobs last month on a monthly basis, November’s very strong 28,000 gain was revised up to 29,000, and October’s 20,000 net new job figure was revised up to 24,000.

>As a result, manufacturing’s December employment level of 12.239 million was its highest since February, 2009, when it totaled 12.381 million.

>Manufacturing’s year-on-year job-creation was impressive in December as well, reaching a record net gain of 186,000 for 2014.  This total was also much higher than the 88,000 gain from December, 2012 to December, 2013.

>Nonetheless, because total nonfarm employment continued its major improvement, too, manufacturing’s share of that economy-wide figure has remained at a record low 8.72 percent since September. At its February, 2010 absolute employment bottom, manufacturing represented 10.69 percent of total nonfarm jobs.

>Manufacturing has now regained 786,000 of the 2.293 million jobs it had lost on net from the recession’s onset in December, 2007 to that nadir (34.28 percent). Manufacturing’s current employment level of 12.239 million, therefore, is still 1.507 million below its last pre-recession monthly figure of 13.746 million.

>By contrast, since its own February, 2010 absolute recessionary low point, total nonfarm employment is up by 10.692 million. That’s 1.997 million more net new jobs than the 8.695 million lost from the recession’s onset to the employment trough.

>Manufacturing’s share of the nation’s total job gain since February, 2010: 7.35 percent.

>Manufacturing wages after inflation rose in November (the latest figures available) by 0.38 percent on a monthly basis. That was better than the 0.28 October figure. November’s real year-on-year manufacturing wage gains also topped October’s – rising by 0.28 percent versus 0.10 percent.

>But measured year-on-year, real manufacturing wages rose much more slowly in both November and October than they did during the previous year for both months (0.28 percent versus 1.16 percent, and 0.10 percent versus 1.45 percent, respectively).

>Real manufacturing wages as of November are down 1.77 percent since the current recovery technically began in June, 2009.  Since then, overall real private sector wages are up 0.78 percent.

>Nominal manufacturing wages fell on a monthly basis in December for the third time this year.

(What’s Left of) Our Economy: Hopium Dominates Mainstream Media Coverage of Wage Trends

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Jobs, Mainstream Media, wage inflation, wages, {What's Left of) Our Economy

I used to be absolutely certain that international trade was the area of economics that journalists covered worst. Recently, it’s become increasingly clear that reporting on American wage trends, and specifically the issue of whether they’re finally starting to rise at acceptable rates, is giving trade reporting a run for its money.

The latest and possibly most egregious examples come from reports on the November jobs figures released yesterday by the Labor Department. According to The New York Times‘ Neil Irwin, “[W]hat was warming the hearts of many jaded economy-watchers on Twitter Friday morning were the numbers on wages.” In the words of the Washington Post’s Chico Harlan, “the latest numbers came with nascent signs of wage growth, the result of qualified individuals reentering the workforce, putting pressure on companies to retain their best employees or bid for new applicants.”

Financial Times correspondents told us, “Wages rose by 0.4 per cent over the previous month — the equivalent of 5 per cent at an annualised pace. That was much faster than the pace seen so far in the recovery, and is enough to drive inflation higher if sustained.” Bloomberg’s story featured the headline, “Broadest Job Gains Since 1998 Mean Faster Wage Growth is Coming.”

It’s like no one knows how to count, or bothers to look at the historical tables posted on the Bureau of Labor Statistics website. For this data shows unmistakably that there is absolutely zero evidence of any pick up in wages. More specifically, the type of gain registered in November is anything but unprecedented during the current economic recovery, and has added up to bupkus over the longer haul.

Let’s assume that the November numbers, which are still preliminary, hold up – or even improve. First, the monthly increase was 0.37 percent (before adjusting for inflation), which is only 0.40 if you round up. Much more important, this gain came after two months of data that were bad even by recent wage standards – a 0.12 percent advance in October (also still preliminary), and no change at all in September. In fact, here are all the monthly changes so far for 2014:

January +0.21 percent

February +0.21 percent

March +0.21 percent

April +0.04 percent

May +0.21 percent

June +0.29 percent

July +0.04 percent

August +0.33 percent

September 0 percent

October +0.12 percent

November +0.37 percent

Hats off to you if you can describe this as a wage pickup with a straight face.

But what about Harlan’s observation that November’s wage “spike” was “the sharpest month-to-month change in more than a year”? The only reasonable answer is “big deal.” Anyone familiar with the data knows that such single-month improvements have had no predictive value whatever.

For example, Wages rose even faster in June, 2013 – by 0.38 percent. Here’s how they fared over the next six months: -0.04 percent, +0.25 percent, +0.12 percent, 0.12 percent, 0.25 percent, and 0.08 percent.

Wages also rose by 0.38 percent in November, 2012. Over the next six months, they increased by 0.30 percent, 0.17 percent , 0.17 percent, 0.08 percent, 0.21 percent, and 0.38 percent.

In October, 2011, wage rose even faster – by 0.43 percent. Over the next six months, the rate of change was -0.09 percent, 0.09 percent, 0.13 percent, 0.22 percent, 0.30 percent, and 0.13 percent.

So there’s at least a heavy burden of proof on those who would attach any significance to November’s wage increase.

But these claims look even more fanciful if you examine the year-on-year changes. As widely noted, November’s 2.11 percent increase was still unimpressive historically. (It, too, will be revised.) But in fact, the November gain was unimpressive even by 2014’s measly standards. You’ll see what I mean by looking over this year’s 2013-2014 changes by month so far:

January 1.98 percent

February 2.10 percent

March 2.11 percent

April 1.97 percent

May 2.05 percent

June 1.96 percent

July 2.04 percent

August 2.12 percent

September 2.00 percent

October 1.99 percent

November 2.11 percent

These figures show that the November year-on-year change was only the second highest of 2014, and that it’s been equaled once before. Where’s the momentum?

But perhaps the most convincing rejoinder to the wage pickup claims comes from comparing 2014’s year-on-year changes in wages to 2013’s. Here they are with the 2013 figures in parentheses:

January 1.98 percent (2.11 percent)

February 2.10 percent (2.10 percent)

March 2.11 percent (1.88 percent)

April 1.97 percent (1.97 percent)

May 2.05 percent (2.05 percent)

June 1.96 percent (2.17 percent)

July 2.04 percent (1.91 percent)

August 2.12 percent (2.21 percent)

September 2.00 percent (2.04 percent)

October 1.99 percent (2.25 percent)

November 2.11 percent (2.16 percent)

The message couldn’t be clearer: Wages have been rising more slowly on an annual basis this year than they were last year, not faster. The year-on-year 2013 increases have been greater than their 2014 counterparts for the last four months, and for six of eleven months’ worth of data so far. In three months, the rates of change were identical.

You’ve heard the expression making mountains out of molehills? These reporters have made mountains out of absolutely nothing – at best. One conspicuous exception: The Wall Street Journal’s Ben Leubsdorf did note that “Similar monthly jumps in earnings in recent years have quickly faded.” What are the odds that this instance of sensibility has more predictive value for the Mainstream Media than the November wage gains seem likely to have for American workers?