6 July 2018
Cogito Ergo Non Serviam
June's Non-Farm Payrolls report came out a few minutes ago, and the US economy added 213,000 jobs last month. The unemployment rate ticked up to 4.0% from 3.8% on an increase in the participation rate to 62.9% from 62.7%. Earnings rose five cents per hour, 0.2% for June following a 0.3% increase in May. The annual increase is 2.7%. The economy is not too hot nor too cold. Eventually, something will tip it one way or another, but for now, it is hard to complain.
The Trump administration does deserve some credit for not screwing up the Obama economy it inherited. The tax cut that it rammed through last fall should have accelerated economic activity, but the Fed's rate increases clearly balanced it out. Policy makers working at cross purposes has been common in America for years, and that is largely why the recovery from the Great Recession has been so disappointing. The administration has blown up the deficit and the national debt for political reasons, but it achieved almost nothing of an economic nature in doing so. That bill has yet to come due.
The job growth was spread across a great many sectors. Reuters notes, "Job gains in June were almost broad. Construction payrolls increased by 13,000 after rising by 29,000 jobs in May. Manufacturers added another 36,000 jobs last month on top of the 19,000 created in May. Government payrolls increased by 11,000 jobs in June. That followed an increase of 5,000 jobs in May. Retailers cut 21,600 jobs last month, after boosting payrolls by 25,100 in May."
The economy now has more job vacancies than it does unemployed workers. The LA Times wrote a month ago, "It's the first time that has happened since the government began tracking job openings in 2000. There were a record 6.7 million job openings in April, the Labor Department reported Tuesday. That was an increase from an upwardly revised 6.63 million in March. The revised data show that job openings outstripped total unemployed workers in March for the first time, and the trend continued in April. There were 6.59 million unemployed workers in March and even fewer, 6.35 million, in April, according to the Labor Department's monthly report on job openings and labor turnover, also known as JOLTS." These numbers may have increased the spread.
Some of the problem may be the U-6 rate. It ticked up along with the headline rate, reaching 7.8% up from 7.6%. The number represents people without work or people without as much work as they want, part-time labor desirous of full-time employment. Until this falls closer to the headline rate, it is difficult to see wages accelerating any faster than they are rising now.
Another issue is the productivity growth the US economy sees. There hasn't been much. GDP growth and job growth go hand in hand, but it is clear that the jobs being filled are those that add a minimum to overall economic activity.
That returns the discussion to JOLTS. In a simplistic world, the unemployed would fill the vacant jobs, and unemployment would drop to almost zero. That isn't happening for two reasons. First, the jobs are not where the unemployed are. Moving to where the work is costs money, and it can upset family life. In other words, there are barriers to labor mobility.
Second, and more troubling, is a mismatch between skills required to do the jobs and skills possessed by the unemployed. The vacancies are not for day laborers. Most require highly skilled workers with more than a little experience. America's economic Achilles' heel has always been training. Until that is addressed, the current report is about as good as things can get.
© Copyright 2018 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.