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

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

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

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

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

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

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

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

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

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

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

(What’s Left of) Our Economy: Manufacturing’s Out of its (Short Term) Jobs and Wages Doldrums

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Bureau of Labor Statistics, Employment, inflation adjusted wages, Jobs, manufacturing, non-farm payrolls, recession, recovery, wages, {What's Left of) Our Economy

American domestic manufacturing created 16,000 net new jobs in July on month, its best such performance since February’s 22,000. Coupled with a major (11,000) upward revision for June, the figures demonstrated that U.S. industry has for now emerged from a springtime slump. On an annual basis, manufacturing’s July 66,000 employment improvement was its strongest since February, 2016’s 69,000.

But since the current recovery began, private net job creation has topped manufacturing’s by a factor of nearly 2.5. The same story characterized pre-inflation manufacturing wages. In July, they improved sequentially faster than the private sector’s (0.53 percent to 0.34 percent) but lagged year-on-year (2.42 percent to 2.53 percent) and trailed the previous Julys’ 3.13 percent. And during the current recovery, the private sector’s current dollar wages have increased nearly 20 percent faster than manufacturing’s, although the gap has narrowed year-on-year. But despite its good last two months, manufacturing’s share of total nonfarm employment remained at a record low of 8.47 percent.

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

>U.S. domestic manufacturing net new job creation and wage gains both accelerated sequentially in July, pulling the sector out of a sluggish spring on both fronts.

>Industry’s monthly July jobs gain of 16,000 was its best such performance by far since the 22,000 payrolls improvement in February. Moreover, June’s initially reported 1,000 employment increase is is now judged to have been more than ten times greater (12,000).

>Fiurther, the July figures showed that manufacturing payrolls swelled by 66,000 year-on-year in July – the best annual gains since February, 2016’s 69,000.

>Monthly pre-inflation manufacturing wages growth picked up notably as well in July, from an upwardly revised 0.19 percent in June to 0.53 percent. In May, manufacturing paychecks actually fell on a current dollar basis – by an upwardly revised 0.26 percent.

>Manufacturing’s June sequential pre-inflation wage gains equaled those of the overall private sector, and beat the private sector’s 0.34 percent performance in July.

>Over the longer term, however, manufacturing lagged the overall private sector in both respects, although the paycheck gap has been narrowing slightly recently.

>During the current economic recovery, which began in mid-2009, manufacturing employment is now up by 5.96 percent. Private sector jobs as a whole are up by 14.58 percent during this period.

>Since the late-2007 onset of the last recession, manufacturing’s performance is equally poor. From that time to the early 2010 troughs, manufacturing lost 2.293 million jobs and private sector payrolls shrank by 8.801 million.

>Since then, manufacturing has regained just 42.39 percent of those lost jobs (a total of 972,000). The private sector as a whole has boosted employment by 17 million.

>As a result, total private sector employment is now 7.08 percent higher than at the recession’s late-2007 onset, but manufacturing employment is still 9.61 percent lower.

>Therefore, it’s no surprise that manufacturing’s share of total nonfarm employment in July stayed stuck at its all-time low level of 8.47 percent.

>Wage trends reveal the same manufacturing relative weakness. Industry’s July annual current dollar wage gains of 2.42 percent were lower than the overall private sector’s 2.53 percent. They were also much lower than the 3.13 percent increase recorded for manufacturing during the previous Julys.

>Manufacturing wages before inflation have fared little better during the recovery. As of July, they were up by 15.99 percent since the economy resumed expanding in mid-2009. But overall private sector wage increased by 19.06 percent – 19.20 percent faster.

>Last July, though, the gap was bigger – 23.24 percent.

>Manufacturing generally performs even worse on an inflation-adjusted basis. The latest figures are for June, and show a sequential manufacturing gain of 0.18 percent versus a 0.28 percent read for the private sector overall.

>Year-on-year, real manufacturing wages have risen by only 0.55 percent. That’s both slower than the private sector’s 0.94 percent and manufacturing’s own 2.46 percent constant dollar rise between July, 2015 and July, 2016.

>During the entire recovery, overall private sector real wages are up 4.56 percent as of June – 2.87 times faster than the manufacturing real wage improvement (1.59 percent).

>As bad as that comparison looks, it’s actually narrower than the gap last year – when overall private sector wages had increased 3.48 times faster after inflation than manufacturing wages.

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

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

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

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

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

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

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

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

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

(What’s Left of) Our Economy: More Evidence of Germany’s Stealth Protectionism

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Angela Merkel, consumers, consumption, developing countries, Financial Times, Germany, Global Imbalances, globalization, imports, Matthew C. Klein, protectionism, savings, taxes, Trade, Trump, value-added taxes, VATs, wage suppression, wages, {What's Left of) Our Economy

President Trump’s charges that the United States has signed terrible trade deals in recent decades, and that foreign economies have been the main beneficiaries, inevitably have triggered a potentially useful debate over which major countries are most open to trade and which are tightly closed. Unfortunately, such arguments won’t actually be useful until “open” and “closed” are properly defined, and a new Financial Times column on Germany’s economic policies nicely illustrates how remote that goal remains.

I’ve previously made the case that accurately measuring protectionism – and thus accurately gauging which countries are contributing adequately to global prosperity and which are free-riding – entails much more than adding up individual trade barriers. Such simple counts also mislead on the equally important question of which countries the United States can reasonably hope to trade with for mutual benefit, and which countries can’t possibly qualify.

And because Germany’s government has both taken trade fire from Mr. Trump and vigorously replied, I’ve used it to illustrate the above points. In a short op-ed for USA Today and a much more detailed RealityChek post, I’ve noted that, as with many other leading foreign economies, the main problem with Germany as a promising trade partner stems at least as much from its overall national economic strategy as from its specific trade practices. That is, countries like Germany, which heavily emphasize growing by saving, producing, and exporting, can’t possibly be good trade matches for countries like the United States, whose priorities have been the diametric opposites.

Of course, those national economic strategies manifest themselves in specific practices and policies. (How else could their focus be established?) But the links to trade flows aren’t always clear. For example, there’s widespread reluctance to acknowledge the trade impact of value-added taxes (VATs), which promote exports and penalize imports. The role played by other German policies, like suppressing wages or skimping on infrastructure spending, has been even less apparent.

What the new Financial Times post adds to the mix is a generally neglected form of wage suppression: Germany’s taxes on low-wage workers – which author Matthew C. Klein describes as “among the highest in the world” since at least the turn of the century.

These taxes inflict an outsized blow on Germany’s imports – and on the the world economy as a whole – in at least two important respects. First, economists tend to agree that the lower an individual’s or household’s income, the higher the share of that income will be spent (as opposed to saved). If they’re right, then these taxes ave been hitting Germany’s overall consumption and import levels especially hard. Therefore, these levies look like notable contributors to the bloated German trade and current account surpluses that are not only detrimental to America, but that could threaten the entire world’s financial stability.

Second, as supporters of pre-Trump U.S. trade policies constantly point out, much of what low-income consumers buy is produced and exported by low-income countries (e.g., apparel or school supplies or furniture). So since high taxes on low-wage workers in Germany prevent them from importing as much from the developing world as they could, third world countries need to focus more on customers in more promising markets – like America’s.

Germany and its leader Angela Merkel lately have been basking in the glow of praise from the political classes in the United States and abroad, which have anointed them as among the new, post-Trump champions of free trade and all its purported benefits. (China’s another alleged globalization champion, but that’s another story.) Its lofty taxes on low-wage workers add to the evidence that these titles are wildly premature.

(What’s Left of) Our Economy: Manufacturing Job Creation is Stagnating Again

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Bureau of Labor Statistics, Employment, inflation-adjusted wages, Jobs, manufacturing, non-farm payrolls, real wages, recovery, wages, {What's Left of) Our Economy

American domestic manufacturing created 1,000 net new jobs in June, but the figures underscored that the sector’s employment gains have nearly petered out recently. Including modest (3,000) downward revisions, industry’s employment has grown by only 8,000 since March. Largely as a result, manufacturing’s share of total nonfarm jobs hit a new record low – just under 8.47 percent.

Pre-inflation manufacturing wages ticked up sequentially in June (by 0.08 percent) and the pace of annual increases rose from May’s 1.92 percent to 2.08 percent. But these advances remained the lowest since October, 2015 (2.17 percent), and industry pay continued lagging that of the overall private sector, although the gap between their rates of increase narrowed over the past year – from 22.72 percent to 22.43 percent.

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

>U.S. domestic manufacturing grew by 1,000 on net in June, but this modest number not only contrasted with the solid employment performance registered by the economy as a whole. It also revealed that industry’s net job creation has nearly ground to a halt.

>Including total negative revisions for April and May of 3,000, domestic manufacturers have increased payrolls by only 8,000 since March.

>Largely as a result, manufacturing’s share of total nonfarm employment sank in June to just under 8.47 percent – a new all-time low.

>After falling on month at an upwardly revised 0.34 percent in May, nominal manufacturing wages edged up sequentially in June by 0.08 percent. Yet evidence persisted of a wage lag suffered by manufacturing workers.

>The current dollar monthly wage gain for private sector workers overall was 0.15 percent – nearly twice as great as that for their manufacturing counterparts.

>The same situation held for annual wage trends. Year-on-year, manufacturing pre-inflation wages rose only 2.08 percent in June. The private sector improvement was 2.46 percent.

>Moreover, the June yearly manufacturing wage advance, along with May’s upwardly revised 1.92 percent rise, were the lowest since October, 2015’s 2.17 percent.

>Between the previous Junes, pre-inflation manufacturing wages increased by 3.47 percent.

>On a pre-inflation basis, manufacturing’s wage increases during the current economic recovery still trail those of the private sector, although the gap has narrowed slightly over the last year.

>As of June, 2016, private sector pre-inflation wages were up by 15.72 percent during the expansion (which began in mid-2009) and manufacturing wages were up 12.81 percent. Therefore, private sector wages had risen by 22.72 percent faster than manufacturing wages.

>As of this June, private sector pre-inflation wages were up by 18.56 percent during the recovery, while manufacturing pay was up by 15.16 percent. Therefore, the gap between the rates of increase had shrunk to 22.43 percent.

>Factoring in inflation darkens manufacturing’s wage picture. The latest data are from May, but they show that that month, real manufacturing wages fell sequentially by 0.28 percent while they rose by that amount for the entire private sector.

>Year-on-year in May, the 0.56 percent increase in inflation-adjusted private sector wages was unimpressive. But it beat manufacturing’s performance – which flat-lined. Between May, 2015 and May, 2016, after-inflation manufacturing wages increased by 2.45 percent.

>During the entire recovery, overall private sector real wages are up 4.27 percent. For manufacturing? Less than half that improvement: 1.49 percent.

>Manufacturing’s June year-on-year jobs increase of 49,000 greatly exceeded the previous Junes’ annual increase of 9,000, underscoring the sector’s recent exit from an employment recession.

>Nonetheless, over the longer term, manufacturing has continued to lag the private sector overall on the payroll front.

>During the current economic recovery, which began in mid-2009, manufacturing employment has grown by only 5.71 percent. For the private sector as a whole during the expansion, it’s up by 14.39 percent.

>Since the late-2007 onset of the last recession, manufacturing’s performance is equally poor. From that time to the early 2010 troughs, manufacturing lost 2.293 million jobs and private sector payrolls shrank by 8.801 million.

>Since then, manufacturing has regained just 41.12 percent of those lost jobs (a total of 943,000). The private sector as a whole has boosted employment by 16.794 million.

>As a result, total private sector employment is now 6.91 percent higher than at the recession’s late-2007 onset, but manufacturing employment is still 9.82 percent lower.

Im-Politic: Beyond the (Poll) Numbers on Immigration

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culture, Democrats, economy, Gallup, Im-Politic, immigrants, Immigration, Jobs, polls, Republicans, taxes, Trump, wages

Do apparently clashing poll results on immigration mainly signal that polling companies don’t know what they’re doing? That Americans are fundamentally conflicted on the issue? Or can sensible, and even obvious, reasons be identified for the seeming gap if you just do a little extra thinking? Examining three recent Gallup soundings convinces me that it’s the latter.

On the proverbial one hand, two new Gallup surveys about immigration appear to show that Americans have become much keener on immigrants – possibly including illegal immigrants, though Gallup hasn’t drawn this distinction. On June 29, Gallup reported that a record (post-1993) share of Americans (49 percent) now agree that “immigrants mostly help the U.S. economy by providing low cost labor.” Moreover, except for a drop in the very late 1990s and early 2000s, this number has been rising – though since 2005, the increase has been gradual.

Forty percent of respondents agreed that immigrants “most hurt the economy by driving wages down for many Americans.” In contrast to the trends for those expressing favorable opinions, the share of Americans worried about immigrants’ wage-related economic impact has decreased pretty sharply since 1993 (when it stood at 64 percent), and especially since the early 2000s (when it peaked at 65 percent).

Also encouraging for proponents of more immigration or more lenient policies towards illegal immigrants: a poll the day before showing that the percentages of Americans viewing immigrants as a plus rather than a negative for the country on economic and non-economic grounds had grown impressively between 2007 and 2017. Interestingly, though, even in 2017, the only category in which a majority of Americans emphasized the positive impact of immigration was in “food, music and the arts” (57 percent – up from 40 percent in 2007). Only ten percent of Americans said that immigration had worsened matters on these scores.

On “the economy in general,” only 45 percent in 2017 saw immigrants “making the situation in the country better” (up from 28 percent in 2007). And only 23 percent and 20 percent believed that immigrants had improved the national situation when it comes to “taxes” and “job opportunities for you and your family” – up from 19 and 11 percent, respectively, in 2007.

As for those who believed immigrants’ effects were negative, 30 percent agreed with that proposition regarding the overall economy, 41 percent went along on the subject of taxes, and 28 percent expressed this view on the job issue. (The remainder of respondents stated that immigrants weren’t having much effect in any of these areas.)

As Gallup noted, positive answers to these questions in 2017 were generally at their highest levels since the firm began asking them in 2001. And despite the high negative numbers, a strong argument can be made that the considerable indifference expressed can be seen as an endorsement of immigrants’ growing numbers overall, given the emotional resonance of the issue.

Yet a June 7 Gallup survey created a substantially different picture. It reports that the shares of Americans believing that immigration “should be decreased” has kept falling since the mid-1990s (from 65 percent to 35 percent). But it was still bigger than the growing share believing that immigration “should be increased” – which has risen from the high single digits from the mid-1960s to 24 percent nowadays. Thirty five percent of Americans want “immigration to be kept at its present level,” and this number has stayed pretty stable – with some fluctuations – since the mid-1960s.

And here’s a surprise: Over the past year, the share of Democrats and Democratic leaners who favor decreasing immigration has actually risen slightly (from 20 to 23 percent) while that of Republicans and Republican leaners has shrunk from 60 percent to 48 percent. It’s true that the share of Democrats and leaners favoring greater immigration levels rose slightly as well. But it still stands at only 33 percent. (The rest expressed satisfaction with current levels.)

In this survey, Gallup analysts ventured an explanation for the unusual finding for Republicans; the GOP shift:

“could reflect a sense of political victory among Trump supporters who believe the president is fulfilling the immigration-related promises he made on the campaign trail. Republicans could, thus, feel more satisfied with the current status of immigration than they did during the height of the presidential election. Also, some Trump supporters might believe immigrants are being more thoroughly vetted by the Trump administration.”

I wish that Gallup had been as analytically ambitious in interpreting at least some of the growing popularity of the immigrant population according to the many indicators. One explanation that seems pretty obvious to me: It’s been influenced pretty considerably by the phenomenal growth of the country’s immigrant population. Indeed, since 1960, it’s more than quadrupled in absolute terms (to an estimated 41.3 million as of 2013). And from 1970 to 2013, immigrants increased their share of the American population from 4.7 percent to 13.1 percent. So more of the respondents being reached by Gallup are immigrants themselves, or their children.

It’s true that throughout American history, immigrants have shown a striking tendency to oppose more immigration once they’ve become established in their new homeland – usually for fear of facing new economic competition. But one of the most important and distinctive aspects of American immigration policy in recent decades has surely undercut this form of nativism – the focus on family reunification. That is, it’s likely that many recent immigrants favor more immigration because they view it mainly as a chance to bring in not additional low-wage workers, but close relatives. At the same time, we’ve got statistics strongly indicating that Hispanics’ views on immigration don’t necessarily dovetail with this observation.

So it seems that the most useful bottom line is that polls continue to be important sources of information about major political, social, economic, and other trends, but that to gauge public opinion accurately, you need to keep looking beyond the raw numbers.

Im-Politic: Free the Mercury News H1B Debate Video!

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H1B, H1B visas, Im-Politic, immigrants, Immigration, media bias, Mercury News, Norman Matloff, Ro Khanna, Silicon Valley, technology companies, technology workers, Voice of America, wages

There’s been no shortage of controversy stirred up by the H1B visa program that brings immigrants to the United States to take jobs allegedly requiring special talents – mostly in technology companies. So when what could well have been the first public debate ever that centers on this subject is held that included a researcher on the visas (who has charged that they overwhelmingly go to foreign workers who simply lower wages for companies who want to replace more expensive Americans) and a politician who’s been strongly in favor, you’d think a major newspaper would find that pretty newsworthy.

In the case of the Mercury News, however, you’d be wrong. And much worse, it looks like the San Francisco Bay area daily is keeping a video of the event under wraps because it makes the politician – whose views closely mirror the paper’s pro-H1B editorial stance – look absolutely terrible.

Here’s the skinny on the event. Precisely because there’s no recording available, I’m relying on this account from participant Norman Matloff, a computer science professor at the University of California, Davis, a leading national authority on immigration issues and the H1B program in particular, and a strong critic of the latter. Joining Matloff on a panel convened at the newly opened offices of the Voice of America’s Silicon Valley bureau were freshman Silicon Valley Congressman Ro Khanna and Kamran Elahian, who Matloff describes as “an immigrant tech entrepreneur.”

According to Matloff, most of the H1B exchanges took place between him and Khanna, who has been characterized in the press as “the favorite of the tech industry since he tried to first overtake incumbent Mike Honda in the 2014 election” in large part because of his defense of the domestic tech industry’s H1B practices.

As Matloff describes it, Khanna – who has also been described in the national media as a rising Democratic party star and champion of pragmatic fixes for economically besieged middle class Americans – was stunningly ignorant about recent H1B-related news developments. More troubling: Khanna sunk to thinly disguised personal (and completely unjustified) attacks on Matloff and several times seem to have flown off the handle when presented with evidence that clashed with his preconceived ideas.

I’d say “Don’t take my (or Matloff’s) word for it; see for yourself” – but I can’t. The debate was filmed by the Mercury News, but in response to a query from Matloff about whether the video would be posted, a reporter he knew at the paper told him that

“it looks like the video was essentially scrapped as a standalone report, but there’s apparently a possibility that parts of it will be used in coverage of Rep. Khanna. Not sure the reason(s) for this, but I know videos of such events are often just used in bits and pieces…”

As Matloff noted in an email to me, “Certainly it would have cost the Merc nothing to put the video on the Web, quite easily and simply.” And it’s hard to disagree with his judgment that the paper “would be performing a major public service by placing the video online (in full, of course).”

So it’s necessary to take seriously Matloff when he speculated, in that same email to me: “I can certainly see the Merc wanting to protect Rep. Khanna. They had endorsed Khanna, and generally feel their loyalty is to the tech industry. Their coverage of H-1B has been fair, but their editorial position has always been pro-H-1B.”

Matloff’s views are hardly dispositive – though I have always found him to be scrupulously honest. What could not be clearer, however, is that the Mercury News could reenforce its claims to objectivity by posting the video. With every passing day that it fails, the case for questioning its motives can only grow.

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

Tags

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

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

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

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

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

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

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

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

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

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

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

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

(What’s Left of) Our Economy: And the Labor Shortage/Immigration Beat Goes On

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CNN.com, fake news, illegal immigrants, illegal immigration, Immigration, labor shortages, productivity, wages, {What's Left of) Our Economy

Here’s yet another Open Borders- and amnesty-friendly article from the Mainstream Media that simply doesn’t add up – this time from CNN.com. In this story about a small San Francisco-area manufacturer who claims that he lost a tenth of his employees due to a 2011 government raid in search of illegal immigrant workers, one whopping inconsistency in particular stands out. It concerns the wages paid by the employer Emerald Packaging of Union City, California.

Emerald’s owner, claims that the company is still suffering from the personnel losses because he can’t find adequate replacements. And the CNN reporters’ sympathy for his supposed plight – and the obvious difficulties encountered by his illegal workers – was made clear by the article’s melodramatic headline: “RAIDED: Immigration agents showed up at Kevin Kelly’s factory and he lost his star workers.”

RealityChek regulars know by now that such claims of labor shortages due to restrictive immigration policies are usually open and shut tip-offs that the business in question is paying inadequate wages, or has refused to automate and become more productive. As I’ve noted repeatedly, mainstream economic theory teaches that when the demand for anything – including labor – exceeds the supply, the price of that commodity (in this case the wage and/or non-wage benefits) tends to rise until a new equilibrium is restored. Alternatively, businesses tend to substitute capital (typically in the form of technology) for what they view as overly expensive labor.

Kelly emphatically denied to the CNN reporter that he’s been skimping on wages by using illegal workers: “When people say these companies are hiring illegal labor because they want to keep their costs down… in our case that argument is complete bulls–t.”

In fact, according to Kelly, the jobs that illegals were filling – and that in some cases have remained unfilled – “aren’t cheap positions.” He added that “They range from $15 an hour entry-level jobs to $35 an hour for experienced mechanics. ‘With overtime of $27 to $35 an hour, you can make pretty good money of $75,000 to over $100,000 a year.’”

But his claims started to fall apart – not that CNN picked up on this – the instant he started discussing in detail the employee whose departure he felt most keenly – an assistant foreman named Miguel Gonzalez.

As the CNN article tells it, “Gonzalez had worked for Emerald Packaging for over 20 years. He started as a box handler, moving and storing product pallets and factory supplies, and worked his way up to assistant foreman. He was a gifted mechanic and Kelly relied on him to help keep the factory running.” Further, he could:

>”walk into my office and tell me what’s going on in the facility.”

>Gonzales was “Keen to learn and move up the ranks [and] routinely took on extra work and hours. He also rarely missed work, even returning to the factory floor just two days after his first child, Casandra, was born.”

>Soon after Gonzalez’ hiring, “he showed initiative by tinkering with and fixing up the machines on the factory floor on his own time to help them operate better. Two years into the job, he was promoted into a role where he learned to set up, repair and maintain the factory equipment.”

>”Over time, [he] taught himself every aspect of the business, including payments and shipping.”

>In Kelly’s words, “He was the single best machine mechanic we had.”

>”Losing him had an immediate impact on production because there just wasn’t anybody of Miguel’s caliber to replace him. There just wasn’t,” said Kelly.

And what was this supremely talented “star worker” making in 2011, after twenty years of superlative performance? Twenty-two dollars per hour. (He also received healthcare and retirement benefits.) According to the Labor Department’s data, that wage is somewhat ($2.50 per hour) more than the average hourly wage (before inflation) for all workers in the plastics packaging manufacturing sector that year, and a little over six dollars an hour more than non-supervisory workers alone make. (It’s not clear whether an assistant foreman qualifies in the Labor Department’s eyes as a supervisory or a non-supervisory worker.) But that $22 per hour is also about $13 dollars an hour less than what Kelly said he pays “experienced mechanics” nowadays (five years later).

There’s no doubt that some businesses that hire illegal immigrants need every body they can get, and there’s no doubt that some illegal immigrants are earning good wages largely as a result. But when a news organization plainly convinced of the desperate need for illegal workers touts a single alleged example of this dire situation that’s so full of gaping holes, Americans are more than entitled to start wondering whether this narrative as a whole is fake news.

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

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

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

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

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

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

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

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

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

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

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

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

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