Jobs Machine Still Cranking Away
Jobs machine still cranking away: July was another good month for jobs. Nonfarm payrolls advanced by 215,000, and May and June's job gains were collectively revised up by 14,000. I don't think it's particularly useful to attach too much weight to any month's number, so let's just think of the trends: we've averaged 235,000 jobs per month over the past three months, and 246,000 jobs per month over the past year. And though some industries (mining, in particular) are showing the impact of headwinds facing the US economy, those headwinds are less obvious in the aggregate data - i.e. is the slowdown in job growth from the torrid pace seen near the end of 2014 reflecting the sectoral headwinds, or just the usual ebb and flow of the employment data? Job growth is still stronger than it was during 2011-2013.
Unemployment rate steady: The unemployment rate held steady at 5.3%. But let's focus on the big picture: over the past year, it's fallen from 6.2%. And given the ongoing health of job growth, it should keep falling going forward. Of course, the wild card remains the labor force - if it accelerates from July's 0.7% year-over-year pace, then declines in the unemployment rate could moderate. This is something that seems possible if job gains remain on track - as the pool of the unemployed grows ever-smaller, employers will have to turn to the neither-unemployed-nor-employed (individuals not actively looking for work).
Wage Growth: That brings us to the final piece of the puzzle, wage growth. The unemployment rate is not far from what many economists consider to be "full employment", so you'd think we might see some signs of cost pressure in the labor market. But so far, the average hourly earnings (AHE) data published in this report are showing no signs of accelerating pay. AHE for private-sector workers were up 2.1% year-over-year, almost identical to the 2.0% annualized pace over the past six years. Whatever "full employment" is, we're clearly not there yet.
Source of Data: Bureau of Labor Statistics
Good stuff, Guy!
Global Director @ DataRobot | Applied AI, Data Science, Enablement
8yGreat post, Guy. Congratulations on your new role at LinkedIn, too! I've missed hearing your economic explanations (and your Fed insights), so I'm availing myself of this forum to pick your brain. Any insight as to why wages are flat? You've hinted, perhaps, that the definition of "full employment" is unable to explain the observed wage growth. Care to expand on that? Are we simply not as close to "full employment" as economists believe or is another factor in play?
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8yHey, welcome to the west coast!
Senior Credit Analyst at CreditPulse.com
8yThe real intent of the latest jobs data is to provide economic cover for the Federal Reserve as they are about to start raising interest rates. This jobs report is something the Fed can point to later if the economy ends up tanking more as a result of their action. Unfortunately, much of the data coming out of Washington these days is manipulated just like it once was at Enron.
Senior Credit Analyst at CreditPulse.com
8yThe real intent of the latest jobs data is to provide economic cover for the Federal Reserve as they are about to start raising interest rates. This jobs report is something the Fed can point to later if the economy ends up tanking more as a result of the rates increases. Unfortunately, much of the data coming out of Washington these days is manipulated just like it once was at Enron.