(What’s Left of) Our Economy: More Evidence That Stimulus-Bloated Demand is the Main U.S. Inflation Driver

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CCP Virus, China, consumer price index, consumers, coronavirus, COVID 19, Covid relief, CPI, demand, inflation, Jobs, population, retirement, stimulus, Sun Belt, supply, supply chains, The New York Times, Ukraine War, workers, Wuhan virus, Zero Covid, {What's Left of) Our Economy

The New York Times just provided some important evidence on the big role played by super-charged consumer demand in super-charging inflation – this article showing that the Sun Belt has been the U.S. region where prices have been rising fastest.

The finding matters because a debate has been raging among politicians and economists over the leading causes of multi-decade high inflation rates with which Americans have been struggling over the last year and a half or so.

On one side are those who claim that overly generous government stimulus spending is the main culprit, because it’s increased U.S. buying power much faster than the supply of goods and services has grown. On the other side are those who focus on the inadequate amount of goods and services that companies are turning out, stemming from supply chain disruptions rooted in the stop-and-go nature of the American economy from successive waves of pandemic downturns and slowdowns to the Ukraine war to China’s ridiculously draconian Zero Covid policies.

Clearly, all these developments deserve blame, but the regional disparities in inflation rates provide pretty convincing support for emphasizing bloated demand.

Here’s the latest annual disparity in the headline Consumer Price Index as presented in the Times article:

U.S. total:    8.5 percent

South:          9.4 percent

Midwest:     8.6 percent

West:          8.3 percent

Northeast:   7.3 percent

It correlates roughly, by the way, with the data in this report last spring from the Republican members of Congress’ Joint Economic Committee.

And here’s a principal, demand-related reason: The Sun Belt states of the South and West have been the U.S. states that have gained the most population during the pandemic period. Indeed, according to the latest U.S. Census data, eight of the ten states with the fastest overall population growth between July, 2020 and July, 2021 was a southern or southwestern state, and the same holds for five of the ten states with the fastest population growth in percentage terms.

It’s true that population growth often increases supply, too – by boosting numbers of workers. The U.S. government doesn’t break out job creation along the above regional lines, but a look at individual state totals doesn’t conclusively brand the Sun Belt as an national employment leader. On average, relatively speaking, Arizona, California, Florida, Nevada, and Texas have created more jobs from the pandemic-period bottom in April, 2020 through last month, as shown in this table:

U.S. total:    +16.87 percent

California:   +17.98 percent

Florida:        +21.05 percent

Texas:          +17.31 percent

Arizona:       +16.02 percent

Nevada:        +30.92 percent

But don’t forget – many of these states have outsized travel and tourism sectors, and you know what happened to those activities during the worst of the pandemic. So in part, their employment bounced back so quickly because they had plummeted so dramatically as the CCP Virus’ first wave spread.

Moreover, many of these states are big retirement destinations, too, and as their overall population increase makes clear, this trend has intensified since the pandemic arrived. Of course, the workers in any given state don’t only sell goods and services to that state’s population, and a given state’s residents don’t only buy goods and services from providers in that state. Yet it’s certainly noteworthy that the number of the Sun Belt states’ consumers rose faster relative to the national average than the number of Sun Belt workers.

And in this vein, Sun Belt inflation probably is also particularly hot partly because so many of the newcomers are wealthy. Indeed, one recent study found that, early in the pandemic, “Of the 10 states with the largest influx of high-earning households, nine are located in the Sun Belt, including the six-highest ranked states, starting with Florida.”

Because they bring so much spending power to their new home states, these wealthier Americans naturally tend to drive prices up unusually fast.

As the Times article notes, some prominent reasons for scorching Sun Belt inflation are unrelated to population-driven demand growth – notably much lower population densities that generate more gasoline-using driving.  But the impact of population movement and all the disproportionately high inflation it’s clearly creating is hard to ignore.  And if a consumption shock has spurred so much inflation in the Sun Belt, why wouldn’t it be affecting prices this way in the rest of the nation, too?          

 

(What’s Left of) Our Economy: So Much for the Both the Great Resignation and the Recovery?

Tags

CCP Virus, coronavirus, COVID 19, Employment, Employment to Population Ratio, EPOP, Great Resignation, job openings, Jobs, JOLTS, Labor Department, Labor Force Participation Rate, LFPR, quits, recession, retirement, unemployment, workers, Wuhan virus, {What's Left of) Our Economy

Yesterday’s official U.S. report on job turnover reenforced two important messages that have sent by lots of recent economic data: first, that the nation’s growth rate really has slowed dramatically this year; and second, that the CCP Virus- and lockdowns-led Great Resignation is ebbing significantly. And not surprisingly, these developments look related.  

The job turnover report, (whose jazzy acronym is JOLTS – Job Openings and Labor Turnover Survey) takes the story up through June, and shows that the number of vacancies that U.S. private sector employers say they want to fill, preliminarily hit its lowest (9.766 million) since last September’s 9.680 million. Moreover, it’s down 9.67 percent since their peak of 10.275 million from last November. (As known by RealityChek regulars, data focusing on the private sector, whose performance is driven mainly by market forces, reveal more about the economy’s true health than data that include government workers. After all, the public sector’s performance is driven mainly by politicians’ decisions.)

Additional economic slowdown (and even recession) signs: This calendar year so far, when the official statistics on gross domestic product (GDP – the standard measure of the economy’s size and how it changes) have shown two consecutive quarterly drops (a popular definition of recession), private sector job openings are off by 5.58 percent.

Private sector job openings, though, are still a whopping 57.64 percent higher than in February, 2020 – the last full data month before the pandemic and ensuing mandatory and voluntary curbs on economic activity began distorting and roiling the economy. So labor market conditions are still far from having returned to their pre-CCP Virus norm.

In even more important relative terms, a similar though more modest pattern appears as well. The private sector job openings rate – which adds total employment figures and openings figures, and then divides them by the number of openings – hit seven percent in June. That was its lowest level since the previous June’s 6.8 percent, it’s fallen for three straight months, and it’s declined by 6.45 percent during the first two (recession-y looking) quarters of this year. And as with the absolute number of job openings, the openings rate remains much (52.17 percent) higher than just before the virus arrived in force.

The Great Resignation claims have held that the CCP Virus pandemic and resulting curbs on individuals’ economic behavior led unprecedented numbers of Americans to leave the workplace for good – regardless of whatever subsequent ups and downs the economy will wind up experiencing.

The private sector quits numbers contained in each JOLTS report provide some support for idea that this Great Resignation is fading already – but only some. That’s because so many Americans who leave their jobs voluntarily seek and get more desirable jobs. They do, however, buttress the slowdown/recession narrative pretty effectively.

In the private sector in June, job leavers totaled 3.999 million – a decrease of 3.96 percent during this possibly recession-y year, the lowest level since last October’s 3.884 million, as well as the first sub-four million number since then. They’re also down 6.26 percent from their CCP Virus-era high (last November’s 4.266 million.

And although the many more Americans still are leaving their jobs each month than just before the pandemic’s arrival in force, this increase is a not-jaw-dropping 22.86 percent – and of course it’s falling

The private sector quits rate has been drifting down, too. As of June, it was 24 percent higher than in immediate pre-pandemic-y February, 2020 (3.1 percent versust 2.5 percent). But it’s 8.82 percent lower than its peak (3.4 percent last November) and has dropped 6.06 percent so far this calendar year – suggesting that a slowing economy has reduced workers’ confidence that that better job will be there for the asking.

Also throwing cold water on permanent Great Resignation claims – though barely whispering “recession” so far – are the federal government’s two measures of the share of Americans actually working. Both the Labor Force Participation Rate (LFPR) and the Employment to Population Ratio (EPOP) helpfully provide figures for the entire economy (though their definitions are somewhat different), and for different segments of the population (including age groups). So both shed unmistakable light on the Great Resignation question with data sets for the 55-year old and over cohort. (Don’t forget, though, that neither measure separates out public and private sector workers. So the following results apply for the “civilian noninstitutional population.)  

Yet both measures reveal that the share of Americans either at or near retirement age holding jobs has shrunk during the pandemic era – by 4.22 percent for the LFPR and 4.32 percent for the EPOP. But both measures also show that the current percentages who are employed is at the high end of the range of results since 1948, and well within their post-2000 ranges.

In other words, the percentage of these older Americans in the workforce (38.6 percent as of this June according to the LFPR and 37.6 percent according to the EPOP) was steadily shrinking from 1948 (when these data sets begin) through about 2000, and then grew healthily till the CCP Virus came along (by about 25 percent for both the LPFR and EPOP). Once the worst of the pandemic, it edged back up to long-term normal levels, and may only be leveling off or inching down in the last few months because of the current slowdown or recession – not because of any underlying changes in older Americans’ views of work.

Unfortunately, though, because employment levels are one of the economy’s most conspicuously lagging indicators (due to most business’ tendency to view layoffs as a last resort in the face of worsening prospects), we’ll need to wait further to justify a more definitive recession call from the LFPR and EPOP results. Here, the most useful measures are probably those tracking the so-called prime age (for employment purposes) population – the 25 to 54-year olds.

And labor force participation for these folks is actually up by 0.49 percent so far in this seeming period of economic shrinkage. The EPOP is off, but by a modest 0.87 percent. 

Significantly, going forward, I suspect that the growth slowdown and at least quite possible recession will weaken the Great Resignation further – especially since the income supports provided by the Covid relief measures have stopped.  What I also suspect, however, is that the jobs seniors will once again keep seeking won’t enough to secure their financial futures. 

(What’s Left of) Our Economy: The Worst of All Possible Inflation Worlds for U.S. Workers?

Tags

ECI, Employment Cost Index, Federal Reserve, inflation, Jerome Powell, Labor Department, labor productivity, PCE, personal consumption expenditures index, productivity, recession, stagflation, wages, workers, {What's Left of) Our Economy

The newest report on a key official measure of worker compensation has just shown that, during today’s high inflation era, American workers could be both significantly fueling the soaring prices that are dominating the U.S. economy and getting shafted by them.

This measure – called the Employment Cost Index – is tracked by the Department of Labor, and is watched closely by the Federal Reserve (the government’s chief inflation-fighting agency) for two major reasons. First, it includes not just wages, but salaries and non-cash benefits. Second, unlike the Labor Department’s average wage figures, it takes into account what economists call compositional effects.

In other words, the those wage figures report hourly and weekly pay for specific sectors of the economy, but they don’t say anything about labor costs for businesses for the same jobs over time. The ECI tries to achieve this aim by factoring in the way that the makeup of employment between industries can change, and the way that the makeup of jobs within industries can change (e.g., from a majority of lower wage occupations to one of higher wage occupations).

In his press conference last Wednesday following the Federal Reserve’s announcement of a second straight big increase in the interest rate it controls directly, Chair Jerome Powell mentioned that the ECI report coming out on Friday would greatly influence the central banks’ decision on how much more tightening of credit conditions would be needed to slow the economy enough to cool inflation acceptably.

That’s because, as he has explained previously, the supposedly superior insights on worker pay provided by the ECI enable the Fed to figure out whether a major inflation engine has started to rev up – employee compensation rising faster than worker productivity. Industries (or entire economies) in this situation are denied the option of absorbing wage increases by achieving greater efficiencies in their operations Therefore, they face more pressure to maintain earnings and profits by passing pay increases onto their customers, their customers face more pressure to keep up with living costs by pushing for pay hikes themselves, and what economists term a classic and hard-to-break wage-price spiral takes off.

The new ECI results per se looked alarming enough from this perspective. They showed that between the second quarter of 2021 and the second quarter of 2022, total employee compensation for the private sector ose by 5.5 percent. That’s the fastest pace since this data series began in 2001. Moreover, this record represented the third straight all-time high. (RealityChek regulars know that private sector numbers are the most important gauge, since its pay and other indicators are mainly driven by market forces, unlike the statistics for government workers, where the indicators largely reflect politicians’ decisions.)

Sadly, though, according to the Fed’s favorite measure of consumer inflation (the Commerce Department’s Personal Consumption Expenditures price index), living costs increased by 6.45 percent. So workers fell further behind the eight ball.

Perhaps worst of all, however, productivity growth is in the toilet. We won’t get the initial second quarter figures until September 1, but during the first quarter, for non-farm businesses (the most closely followed measure for the private sector), it fell year-on-year by 0.6 percent – the worst such performance since the fourth quarter of 1993.

Nor was this figure a one-off for the current high inflation period. From the time consumer prices began their recent speed up (April, 2021) through the first quarter of this year, labor productivity is off by 1.36 percent, the ECI is up 3.95 percent, and PCE inflation has risen by 4.65 percent. So a strong case can be made that workers, businesses, and the economy as a whole are in the worst of all possible worlds.

Whenever productivity is the subject, it’s important to note that it’s the economic performance measure in which economists probably have the least confidence. And even if it’s accurate, don’t jump to blame workers for sloughing off. Maybe management is doing a lousy job of improving their productivity. Alternatively, maybe managers simply haven’t figured out how to do so in the midst of so many unusual challenges posed by the pandemic and its aftermath – chiefly the stop-go nature of the economy’s early aftermath, and the resulting turbulence that, along with the Ukraine war and China’s Zero Covid policy, is still roiling and stressing supply chains.

Whatever’s wrong, though, unless a course correction comes soon, it looks like the odds of the economy sinking into prolonged stagflation – roaring inflation and weak economic growth – are going up. And ultimately, that matters more to the American future than whether some form of recession is already here, or around the corner.

(What’s Left of) Our Economy: More Evidence that Pay Really is Worsening U.S. Inflation

Tags

ECI, Employment Cost Index, Federal Reserve, inflation, Labor Department, labor productivity, multifactor productivity, productivity, recession, wages, workers, {What's Left of) Our Economy

Back in February, I wrote that although U.S. workers’ hourly wages were rising more slowly than the standard measure of consumer prices (the Consumer Price Index, or CPI), and therefore on that basis couldn’t be blamed for the recent, historically high inflation, there was one reason to be worried about the last few years’ healthy pay hikes: Such pay was rising faster than worker productivity.

I explained that this trend inevitably fueled inflation because “when businesses are in situations where wages are rising but their operations are becoming more efficient at a faster rate, they can maintain and even increase profits without passing higher costs on to their customers. When productivity is rising more slowly than inflation, this option isn’t available – or not nearly as readily.”

And more important than my views on the subject, these concerns have been expressed by Jerome Powell, Chairman of the Federal Reserve, the U.S. central bank that has the federal government’s main inflation-fighting responsibilities.

So it’s discouraging to report that new government data on both pay and productivity have come out in the last two weeks, and they make clear that the pay-productivity gap has just been widening faster than ever.

The pay data come from the Labor Department’s latest Employment Cost Index (ECI), which tracks not only hourly wages but salaries and benefits, while the productivity figures come from Labor’s new release on labor productivity, which measures how much output a single worker turns out in a single hour. And conveniently, both releases take the story through the first quarter of this year.

The results? From the fourth quarter of last year through this year’s first quarter, total compensation for all private sector workers, the ECI increased by 1.42 percent, while labor productivity for non-farm businesses (the category most closely followed, and basically identical with the private sector) fell by 1.93 percent. That last number was labor productivity’s worst such performance since the third quarter of 1947. (As RealityChek regulars know, I focus on private sector workers because their pay levels largely reflect market forces, not politicians’ decisions, and consequently reveal more about the labor picture’s fundamentals.)  

The year-on-year statistics aren’t much better – if at all. Between the first quarter of last year and the first quarter of this year, the ECI for the private sector grew by 4.75 percent, but labor productivity dipped by 0.62 percent.

And since the U.S. economy began recovering from the first wave of the CCP Virus pandemic, during the third quarter of 2020, the private sector ECI is up by 6.61 percent, while labor productivity is down by 0.78 percent.

As also known by RealityChek readers, labor productivity isn’t the economy’s only measure of efficiency. Multifactor productivity is a broader, and therefore presumably more useful gauge. It’s not as easy to work with because its results only come out annually, and the latest only take the story up to the end of last year.

The picture is decidedly more encouraging – at least recently. From 2020-2021, multifactor productivity for non-farm businesses improved by 3.17 percent. But it still wasn’t good relatively speaking, since from the fourth quarter of 2020 through the fourth quarter of 2021, the private sector ECI increased by 4.38 percent.

Worse, from 2001 (when the Labor Department began the ECI) to last year, pay b that gauge was up 74 percent while non-farm business multifactor productivity had advanced by a mere 16.46 percent.  Therefore, clearly the recent pay and productivity numbers don’t simply stem from pandemic-related distortions of the economy. 

To repeat important points from last February’s post, the productivity lag doesn’t mean that U.S. workers overall don’t deserve nice-sized raises and better benefits, and it certainly doesn’t mean that they’re solely or largely to blame even for poor labor productivity growth. After all, managers are paid as handsomely as they are fundamentally to figure out how to make their employees more productive. Also, productivity is a barometer of economic performance that’s unusually difficult to determine precisely.

But the new figures do strengthen the case that labor costs bear significant responsibility for boosting inflation, and that a major fear surrounding overheated price increases – that inflation acquires powerful momentum as surging prices lead to big wage hike demands and vice versa, and create a spiralling effect that’s excuciatingly difficult to end without the Fed throwing the economy into recession. Just as depressingly, the new pay and productivity figures also strengthen the case that, unless the economy becomes a lot more productive very quickly, the sooner this harsh medicine is administered, the better for everyone in the long run.

(What’s Left of) Our Economy: Pro-Immigration Labor Shortage Claims Keep Going Up as Real Wages Keep Going Down

Tags

compensation, Employment Cost Index, immigrants, Immigration, inflation, inflation-adjusted wages, Labor Department, labor shortage, productivity, wages, Washington Post, workers, {What's Left of) Our Economy

It’s as if the Open Borders Lobby – both its conservative and liberal wings – has recently decided that it’s really had enough of labor market tightness that’s due to reduced immigration, and that’s also giving so many of America’s workers a long-needed pay raise. So it’s been re-upping the pressure to open the floodgates once again and solve this terrible problem. (See, e.g., here, here, and here.)

As is so often the case, the Open Borders-happy Washington Post editorial board has made the case most succinctly: “[C]ompanies are frantically trying to hire enough workers to keep up with the surge in demand for everything from waffle irons to cars. The nation has more than 11 million job openings and 6 million unemployed.

“This imbalance is giving workers and job seekers tremendous power. Pay is rising at the fastest pace in years….”

Yet this claim is not only profoundly anti-American worker. It’s completely false – at least if you look at the only measures of pay that reveal anything about whether employees are getting ahead or not. And they’re of course the compensation measures adjusted for inflation.

What do they show? Between 2020 and 2021, inflation-adjusted hourly pay for all U.S. workers in the private sector were down by 2.10 percent and for blue-collar workers by 1.52 percent. (As known by RealityChek regulars, the U.S. Labor Department that tracks pay trends for the federal government doesn’t monitor any type of compensation for public sector workers because their wages and salaries and benefits are determined largely by politicians’ decisions, not the forces of supply and demand. As a result, they’re thought to say little about the labor market’s true strengths or weaknesses.)

Do you know when such wages have fallen by that much? Try “never” for the entire workforce (where the Labor Department data go back to 2006), and for blue collar workers, several times during the 1970s, which were a terrible time for the economy overall. (For this group, the official numbers go back to 1964).

But haven’t better benefits compensated? Two Labor Department data sets do measure changes in all forms of compensation. The best known, and the one most closely followed by the Federal Reserve and leading economists everywhere, is the Employment Cost Index (ECI). It covers state and local government (though not federal) employees as well as private sector workers. But there’s no evidence of any inflation-adjusted gains for the nation’s workforce – much less outsized gains – from these statistics either.

From the fourth quarter of 2020 to the fourth quarter of 2021, this index did increase by 4.37 percent for all covered workers (breakouts for white- and blue-collar employees only go up to 2006). Yet during this period, the Labor Department’s inflation measure, the Consumer Price Index, was up 7.42 percent. That’s called “falling behind” in my book.

When business (and government on the state and local levels) starts offering pay that’s rising higher than the inflation rate, then Americans as a whole can start worrying about genuine labor shortages. (And even then, as I’ve written, it would be much better for the economy as a whole if companies responded by boosting their productivity, rather than by agitating for more mass immigation with the aim of driving wages down and of course dodging any incentives to operate more efficiently.) For now, though, it’s obvious that what U.S. business is “frantic” about (to use the Post‘s term) isn’t a shortage of workers. It’s a shortage of cheap workers.

(What’s Left of) Our Economy: One Reason Wages May Indeed be Fueling U.S. Inflation

Tags

business, consumer price index, ECI, Employment Cost Index, Federal Reserve, inflation, Jerome Powell, labor productivity, management, multifactor productivity, productivity, wages, workers, {What's Left of) Our Economy

As known by RealityChek regulars, I’ve pushed back strongly (e.g., here) against claims that today’s historically lofty levels of U.S. inflation have been driven largely or even significantly by wage costs. My main point: However healthy, if the wage increases American workers have gained recently lag behind the overall increase in prices across the entire economy – which has been the case – then how can they deserve much blame?

Even so, one other consideration needs to be added to the mix. It was mentioned by Federal Reserve Chair Jerome Powell in his press conference following the central bank’s announcement of its monetary policy decisions during the December meeting of its Open Market Committee (the partly rotating group of Fed governors that determines short-term interest rates and, more recently, the pace of bond buying or selling).

As Powell stated, the Fed is watching “the risks that persistent real wage growth in excess of productivity [growth] could put upward pressure on inflation.” That’s because when businesses are in situations where wages are rising but their operations are becoming more efficient at a faster rate, they can maintain and even increase profits without passing higher costs on to their customers. When productivity is rising more slowly than inflation, this option isn’t available – or not nearly as readily.

Powell also said that “we don’t see that yet.” But in fact, if you compare one measure of employee pay that he’s been watching closely with the most current measure of productivity growth, that’s exactly what you’ll see – and been happening consistently for two decades.

The pay gauge in question is the Employment Cost Index (ECI) created by the Labor Department. What’s especially useful about it is that is takes into account not only wages and salaries, but the full range of benefits workers receive. This data series goes back to 2001, and if you (1) look at the total compensation figures for all private sector workers (as always, I leave out government workers because their pay is determined largely by politicians’ decisions, not market forces) in pre-inflation terms, then (2) place them side-by-side with the inflation results, and then (3), check these against the Labor Department’s labor productivity results, it’s clear that pay has been rising considerably faster than productivity.

For example, during largely high-inflation 2021, the employment cost index (which is measured quarterly) rose on an annual basis during all four quarters.Yet during the second, third, and fourth quarters of last year, labor productivity by the same yardstick improved more slowly than the ECI. In other words, worker pay was rising faster than productivity.

Nor are these results atypical. In fact, from the first quarter of 2001 through the fourth quarter of last year, the ECI is up 74.12 percent but labor productivity is up jus 47.62 percent.

Another way to look at the subject: Before the fourth quarter ECI and labor productivity results came out (on January 28 and February 3, respectively), I looked at the annual changes in both sets of data for the third quarters of each year going back to 2001. During those 21 third quarters, annual productivity growth lagged annual ECI growth in 15.

It’s important to note that these conclusions don’t automatically justify assuming that worker compensation increases are a major driver of today’s inflation after all, much less that productivity growth’s relatively slow advance is employees’ fault. After all, as just noted, labor productivity has been rising more sluggishly than the ECI for two decades. Inflation didn’t take off until last year. Moreover, the labor productivity number reflects far more than the amount of physical and/or mental effort workers put into their jobs. It’s also a function of how well business owners perform – e.g., in terms of giving their employees the equipment and training they need to do their jobs effectively, and of organizing their companies in ways that maximize performance.

In addition, labor productivity isn’t the only gauge of efficiency monitored by the Labor Department. Multifactor productivity (also known as total factor productivity) is tracked, too. This data series, as its name implies, tries to determine efficiency by examining all the inputs that go into corporate operations – including not just person hours worked, but capital, energy, materials, and all the services that are used to produce goods and, yes, other services.

I haven’t compared the trends in the ECI and multifactor productivity, though, for one big reason: Because it depends on collecting so much more information, the multifactor productivity results come out much more slowly than the labor productivity reports. And the 2021 figures don’t seem to be due out for several months.

Finally, as I’ve also noted (see, e.g., here), most economists believe that productivity is one of the most difficult features of the economic landscape to measure. So the wage and productivity comparisons should be viewed with some non-trivial amount of caution. 

Yet if worker compensation is indeed rising faster than productivity, that’s a story that’s unlikely to end well for the U.S. economy. Maybe those multifactor productivity figures – whenever the heck they’re released – will provide some much needed further clarity. 

 

(What’s Left of) Our Economy: More Signs of a Slowing “Great Resignation” – For Now

Tags

CCP Virus, coronavirus, COVID 19, Employment, Great Resignation, Jobs, JOLTS, quits, quits rate, workers, Wuhan virus, {What's Left of) Our Economy

Last month I promised to resume following the U.S. Labor Department’s monthly statistics on job turnover for two reasons. First, these numbers, which are crucial to gauging the extent of the CCP Virus-era “Great Resignation” that’s roiled the nation’s employment picture, started showing signs of returning to pre-pandemic norms. Second, these indications that the peak had been hit of Americans voluntarily leaving their jobs pre-dated the arrival of the virus’ super-infectious (but relatively mild) Omicron variant. That development raised the prospect of infection fear and worsening labor shortages keeping the Resignation going strong and even regaining steam.

Yesterday morning, the latest (December) results came out, and this new JOLTS (Job Openings and Labor Turnover Survey) suggests that the gradual normalization continued even as Omicron’s impact began metastasizing.

As reported last month, the November JOLTS release showed a record, in absolute terms, in the number of Americans in the non-farm labor force (the U.S. government’s definition of the national employment universe) who quit their jobs.

Yesterday’s figures show that November remains the absolute quits king, but that this figure has been revised down from 4.527 million to 4.449. And quitters’ ranks shrank further in December – to a preliminary 4.339 million.

The quits data for the private sector no doubt says more about the Great Resignation and its fate, since its employment trends reflect mainly market forces and not politicians’ decisions  And the private sector quits level is declining, too. November’s originally reported 4.311 million number is now judged to be 4.283 million, and the preliminary December figure is 4.129 million.

Both the non-farm and private sector quits levels are still considerably higher than their pre-pandemic peaks (July, 2019’s 3.627 million for the former and the same month’s 3.448 million for the private sector). But as known by RealityChek regulars, these absolute numbers don’t tell the whole story, or even the most important parts of the story. In this case, that’s because the number of U.S. workers keeps growing.

Therefore, it’s vital to look at the quits rate – the percentage of workers voluntarily taking their jobs and shoving them. And by this measure, gradual normalization can be seen, too.

For non-farm workers, November’s three percent result was unrevised, and the figure fell to a preliminary 2.9 percent in December. They’re both above the pre-pandemic high of 2.4 percent (which came in February, July, and August of 2019). But the non-farm quits rate has been flat on net since August.

For private sector workers, November’s 3.4 percent figure stayed unrevised, and the quits rate fell to a preliminary 3.2 percent in December. And although these shares, too, are significantly higher than the pre-pandemic peak (2.8 percent, set in January, 2001), the quits rate has actually inched down since reaching 3.3 percent in August.

It’s still too early to say that the Great Resignation has even topped out. After all, the Omicron wave may be cresting now, but the next JOLTS report – due out March 9 and covering January – might still cover a period when it’s widespread. Plus, no one knows for sure whether there’s a new variant in store, and how severe it will be. Moreover, that next JOLTS report will contain revisions going back to January, 2017. So clearly it won’t provide much rest for weary observers trying to figure out how quickly the economy is moving past its CCP Virus-era gyrations – if at all.

(What’s Left of) Our Economy: Could the “Great Resignation” be Ending?

Tags

CCP Virus, coronavirus, COVID 19, Employment, Great Resignation, Jobs, JOLTS, labor market, labor shortages, quits, quits rate, transitory, workers, Wuhan virus, {What's Left of) Our Economy

The Labor Department’s monthly “JOLTS” report is one of the official U.S. economic data series that I stopped covering during the CCP Virus era. After all, the results seemed to be so overwhelmingly driven by pandemic-specific disruptions, and therefore so unrelated to the fundamental state of the U.S. economy.

I’m still wary of putting too much stock in JOLTS, which stands for Job Openings and Labor Turnover Survey. As the name suggests, it tracks how many positions at American businesses (including in government) are vacant, how many workers are quitting, how many are getting fired or laid off, and how many are getting hired, and it’s one of the key sets of statistics that have revealed both the extent of the labor shortages marking the economy and of what’s been called the “Great Resignation” – a major and indeed record increase in the numbers and percentages of workers voluntarily leaving their employers.

Yet since this development has so clearly (at least to me) stemmed from pandemicky circumstances, I assumed that it would turn out to be largely “transitory” (to use the Federal Reserve’s now “retired” description of elevated inflation).

So why this JOLTS-y post? Because this morning’s latest report, which takes the story through November, does show signs of normalization in those jobs quits. To be sure, the absolute numbers of quits hit yet another record – 4.527 million. In fact, that total represents the seventh straight month in which this quits level topped the pre-CCP Virus high of 3.627 million, set in July, 2019.

As known by RealityChek regulars, though, absolute numbers don’t provide the entire, or even the most important parts of, a picture. In this case, that’s because the numbers of employed Americans have grown substantially since the JOLTS series began at the end of 2000. What matters more is the quits rate – the percentage of the employed leaving their positions.

For non-farm workers (the Labor Department’s U.S. employment universe), this rate, at three percent in November, is still well above the pre-pandemic high of 2.4 percent – which also came in 2019 (in February, July, and August), as well as in April, 2001. But it’s barely risen on net since April’s 2.8 percent.

For private sector workers, the recent quits rates movement is less dramatic, and that’s more important for judging the transitory-ness of the Great Resignation – because the private sector is much bigger than the public, and the trends shaping it are much more reflective of market forces, not politicians’ decisions.

But it still seems worth noting that even though it rose to a record 3.4 percent in November (significantly higher than the pre-pandemic record 2.8 percent, set back in January, 2001, the private sector quits rate has been pretty stable since coming in at 3.3 percent in August.

Two caveats need to be mentioned, though. First, these November results are preliminary. Second, they predate the arrival in the United States of the CCP Virus’ highly infectious Omicron variant, which threatens to roil labor markets once again for the foreseeable future. One thing’s for sure – it’s time for me to renew monitoring these JOLTS reports!

(What’s Left of) Our Economy: U.S. Real Wage Decline is Really Widespread

Tags

CCP Virus, child care, coronavirus, COVID 19, elder care, health care, inflation adjusted wages, labor shortages, nursing, real wages, supply chain, trucking, wages, warehousing, workers, Wuhan virus, {What's Left of) Our Economy

A Facebook exchange I was involved in last night prompted me to check the U.S. government data to find out how widespread was the trend of falling real wages – and by definition falling living standards. And the answer is: incredibly widespread – including in supply chain-related sectors where crippling labor shortages are often blamed for much of the bottleneck problem that has helped fuel inflation by reducing the supply of goods sought by Americans.

The exchange began when a Facebook friend posted her view that the U.S. economy was doing far better than gloomy press reports indicated. I countered with my “putting people first” argument that falling living standards meant that the economy was failing in its fundamental mission: improving Americans’ material lives. My interlocutor responded by claiming that the unusually large number of unfilled job openings have appeared during the stop-and-start recovery from the brief but steep CCP Virus-induced downturn showed that many Americans falling behind economically could easily improve their lot by taking jobs in higher paying industries.

I could have answered by pointing out how many Americans in low-paying jobs in particular lack the training to move that wage ladder. But I was more struck by the pervasiveness of the recent decline in inflation-adjusted hourly pay – which shows that even those able to make that transition will find themselves on a downward moving escalator for the time being.

Specifically, I looked at price-adjusted wage trends on a November, 2020-November, 2021 basis for the eight broadest categories tracked by the Bureau of Labo Statistics (BLS). They are: mining and logging; construction; manufacturing; trade, transportation and utilities; information services; professional and business services; leisure and hospitality; and miscellaneous services.

How many of these eight sectors saw real wage declines between the two Novembers? Seven. Leisure and hospitality was the lone exception, and it’s the lowest paying of these categories by far. The constant dollar wage out-performance there was indeed encouraging, but with these hourly earnings still only standing at $6.88 in 1982-84 dollars – versus $11.13 for the private sector as a whole – I wouldn’t claim economic success just yet.

(As known by RealityChek regulars, BLS doesn’t monitor wages in the public sector because there, pay is determined mainly by politicians’ decisions, not economic fundamentals.)

The names of these eight sectors, however, make clear that they’re so broad that they could include subsectors where the story’s very different. And that’s true even for a number of what might be called pandemic-specific sectors with lots of job openings – but only sometimes.

For example, the enormous national healthcare sector is part of the business and professional services grouping, where real hourly wages of $13.44 – higher than the private sector average – are off by a little over one percent so far this year. But for healthcare alone, they’re up by just under one percent (to a lower $12.13, though).

Dig deeper, and you find that after-inflation wages for hospitals, nursing care facilities, elder care facilities, and child care services, have risen, too. But except for hospital workers (a broad, relatively high paying category itself), hourly wages in 1982-84 dollars in none of these sectors is anywhere close to even a measly $10. And none has seen year-on-year wage increases of more than 1.95 percent (for hospital workers).

The wage situation is even worse in many of the supply chain-related industries within the trade, transportation, and utilities super-sector. For example, next time you hear about a dire nation-wide shortage of truck drivers, keep in mind that their real wages have decreased by 3.67 percent annually as of November. And workers at those equally strained warehouses? They’re only off by 0.25 percent. But they’re supposed to be desperate to hire! What gives?

The most obvious answer to me is that a supposed labor shortage in a sector where real wages are decreasing is really a tale of inadequate pay. But that’s a subject for another post – or six. For today, though, it seems abundantly clear that the headline real wage decline number isn’t masking lots of workers gaining ground, and that if you view that standard as the main test of an economy’s success, America’s is definitely flunking.

Those Stubborn Facts: Behind Biden’s Lousy Polls on the Economy

Tags

Biden administration, inflation, inflation-adjusted wages, real wages, Those Stiubborn Facts, Trump administration, wages, workers

After-inflation wages for all private sector workers, Feb.-Oct., 2020: (last Trump year):  +2.81 percent 

After-inflation wages for all private sector workers, Feb.-Oct., 2021 (first Biden year):  -1.84 percent  

After-inflation wages for private non-managerial workers, Feb.-Oct., 2020: +2.84 percent 

After-inflation wages for private non-managerial workers, Feb.-Oct., 2021: -1.53 percent  

 

(Sources: “Average hourly earnings of all employees, 1982-1984 dollars, total private, seasonally adjusted,” Employment, Hours, and Earnings from the Current Employment Statistics survey (National), Databases, Tables & Calculators by Subject, Data Tools, U.S. Bureau of Labor Statistics, Bureau of Labor Statistics Data (bls.gov) and “Average hourly earnings of production and nonsupervisory employees, 1982-84 dollars, total private, seasonally adjusted,” Ibid.)