Friday, January 8, 2016

Wages drop in so-called 'blistering' economy

One of the more insidious ways the federal government coordinates agenda-driven stories with some news organizations is with the monthly jobs report, which are really estimates designed to elicit breathless headlines of a booming economy even as millions of Americans have sat unemployed for years. How do you manufacture 5 percent unemployment? By not counting people who can't find jobs.

Today's Labor Department report that the economy added 292,000 jobs in December achieved its intended outcome, with one local headline bellowing that companies are hiring "at a blistering pace." However, Mike Flynn of Breitbart News adds some context that's always missing from the state-influenced media accounts.
Average hourly wages in December actually fell to $25.24, down a penny from November. The average number of hours worked was also unchanged. To use a technical term, these are weird results. Average hours worked and wages ordinarily rise in the face of strong job growth, as a tightening labor market forces employers to increase pay or get more work out of existing workers.

Part of the explanation could be that while the economy added 2.7 million jobs in all of 2015, this is down considerably from the 3.1 million added in 2014. The labor force participation rate, i.e. the number of adults with a job or looking for work is still at an historically low rate of 62.6 percent.

Another part of the explanation is that job growth doesn’t occur in a vacuum. Every year, the adult population of the country increases, requiring strong job growth simply to keep pace with population change. In 2015, the adult population in the U.S. grew by 2.9 million people. The 2.7 million jobs the Labor Department said were added last year, then, didn’t keep pace with the growth of the population.

This suggests there is still a lot of weakness in the labor market. The economy is gaining jobs, but not faster than the population is growing, so there isn’t pressure to lift wages or increase hours. The net result is that average weekly take-home pay in the month of December actually fell slightly. [...]

The Labor Department reported that the manufacturing sector gained just 30k jobs in all of 2015, down considerably from the 215k jobs gained in 2014. Most of the job gains reported Friday, in fact, were in temporary services, construction, leisure and hospitality and health care.

There is another note of caution in Friday’s jobs report. In December 2014, the economy gained around 330k jobs. Even though this year’s gain was higher than expected, it was still down from the year before.
So failing to provide enough jobs to keep up with population growth is akin to "hiring at a blistering pace"? Only in certain newsrooms when a Democrat is in the White House and his would-be successor is struggling in the polls.

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