July jobs: nice pop on payrolls but flat wage growth

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

[This jobs report is an important one in terms of assessing the impact of headwinds on the job market, but because it’s sort of a holiday, I’ll just offer up a truncated, bullet-point report. As always, thanks to Kathleen Bryant, who got up early on vacation to help me out!]

Toplines:

–Payrolls rose 224,000 last month, well above expectations for ~165K. Though we never want to over-weight one month of noisy data, that’s an important number, suggesting that building economic headwinds haven’t dented job creation much yet at all.

–Our monthly smoother shows average monthly job gains over 3, 6, and 12-month windows. Even including May’s weak 72K (revised) gain, the average over both the past 3 and 6 months has been around 170K jobs/month. That’s a slight downshift from the 12-month average but still a very solid number, one that should handily support the ongoing expansion.

–The unemployment rate ticked up to 3.7% (a statistically insignificant change, btw), but that was mostly due to more people coming into the labor force–the participation rate nudged up 0.1 ppts to 62.9%.

–That’s all good news, but the evolving wage story is less so. As the figures below reveal, our 6-mos rolling average of yr/yr nominal wage growth shows the trend (versus the noisier monthly values) is stalled or even trailing off a bit. This too, is an important finding, suggesting that a) there’s still “room-to-run” in this expansion as labor supply doesn’t appear to be tapped out, b) even with unemployment near 50-yer lows, too many workers still lack the bargaining clout they need.

–That said, nominal wage gains are beating consumer inflation, which is running a bit below 2%, so the buying power of paychecks is rising. Again, this combination of solid job gains, low inflation, and nominal wage growth around 3% should handily support the expansion in at least the near term.

Other observations:

–Gov’t added 33K jobs, and some are saying that’s related to hiring for the decennial Census. Such hiring does and will cause a temporary spike in payrolls, but federal gov’t employment was up only 2K last month. Local gov’t added 29K jobs, so this doesn’t look like a Census issue.

–Manufacturing had a better month in June, adding 17K jobs after being flat for most of the year. One month doesn’t change the recent trend, and the factory sector remains high on the watch list, as the trade war, stronger dollar, and our expanding trade deficit may put downward pressure on the sector in coming months.

–This is a tricky jobs report the Federal Reserve, which is meeting later this month and is expected to cut its benchmark interest rate. But with unemployment below their estimate of the “natural rate” (the lowest jobless rate believed to be consistent with stable prices) and average payrolls gains well north of the “equilibrium” level (the level required to keep unemployment from rising), they will not see a rate cut as an obvious necessity.

–Pushing the other direction–toward a rate cut–are below-target inflation and the absence of wage acceleration.

–So, it’s quantities versus prices! May the best variable win. While I carry a fairly hefty rate-cut bias, I’m not sure what I’d vote for were I at the FOMC table. Given the need for sustained real wage growth for the majority of workers left behind during decades of rising inequality, I’m leaning toward “prices,” as in cut rates in the hopes of even lower unemployment and the possibility of bending the wage-growth curve back up. But I’ll think on it and get back to you later with a definitive call!

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Reposted from On the Economy

Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow.  From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute in Washington, D.C. Between 1995 and 1996, he held the post of deputy chief economist at the U.S. Department of Labor. He is the author and co-author of numerous books, including “Crunch: Why Do I Feel So Squeezed?” and nine editions of “The State of Working America.”

Posted In: Allied Approaches

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Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

National Rifle Association chief Wayne LaPierre has had better weeks. First came the horrific early August slaughters in California, Texas, and Ohio that left dozens dead, murders that elevated public pressure on the NRA’s hardline against even the mildest of moves against gun violence. Then came revelations that LaPierre — whose labors on behalf of the nonprofit NRA have made him a millionaire many times over — last year planned to have his gun lobby group bankroll a 10,000-square-foot luxury manse near Dallas for his personal use. In response, LaPierre had his flacks charge that the NRA’s former ad agency had done the scheming to buy the mansion. The ad agency called that assertion “patently false” and related that LaPierre had sought the agency’s involvement in the scheme, a request the agency rejected. The mansion scandal, notes the Washington Post, comes as the NRA is already “contending with the fallout from allegations of lavish spending by top executives.”

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