December jobs report show wages still flat

Closing the year’s job outlook, was something that most economists, lawmakers, and even the president, were looking forward to. Many were anticipating a great report, if not outstanding, based on prior months. But, there was no joy in Mudville, when the December Jobs Report was released by the Bureau of Labor and Statistics (BLS) this past Friday, as it showed a disappointing 148,000 jobs created, versus an anticipated 190,000.

As often stated, success has many fathers, while failure is an orphan; yet this time around, some claimed paternity of sorts, while others abandoned the baby to the Christmas shopping season, that added, then subtracted its annual flow of temporary workers.

Others still were quick to reassure the public that this was not a time to panic, and reassured them that this was no time to panic, repeat -  no time to panic; and the same reassurance kept hitting the internet and Twitter. Methinks they protest too much.

"It's a disappointment in the headline but on the other hand, lower payroll growth is exactly what we expect," said Josh Wright, the chief economist at iCIMS. "We haven't managed to sustain job growth of above 200,000 jobs per month for three months in a row since the end of 2015,” reported Business Insider.

The details then began to emerge: 20,300 jobs lost in the retail sector. There is no real surprise here, just as a decade ago, a “surprise” loss of employment was seen when temporary census workers were released after their duties.

To be fair, there were some good signs - construction jobs soared with 30,000 jobs, bars and restaurants hitting 25,000, as well as manufacturing, and professional business services, at 15,000, but that’s a figure that we have seen before as being suspicious, since it’s a catchall category that can hold temporary clerical workers, as well as clerks and copyists, and even some of dubious “business” distinction.

The banner rate of unemployment held steady as most predicted, and wanted, at 4.1 percent, reaching a 17 year low rate, which pleased many. But, as the name implies, it gets all of the attention, but is not a wholly accurate number, the broad number is the indicator that should get more attention, than its big brother, but doesn’t. That rate includes discouraged workers who have given up looking and those that are stuck in part-time jobs, but prefer, and often need, full-time employment.

That news is not good -- the rate dropped to 7,9 percent last month, and has not been that low since December 2006; it showed a decreased from 8.3 percent in September.

One uptick was that Black unemployment reached a record low of 6.8 percent, giving encouragement to leaders in the nation’s urban centers.

Still problematic is that wages are  low, with an average of 2.5 percent in November, and little changed in December, where it was 0.3 percent, rising from 2.5 percent the previous year.

“This still broadly reflects the sluggish pay increases we've seen through much of the recovery. With headline unemployment so low, employers should be competing for the best workers on pay. Some indicators like the Atlanta Fed's alternative wage tracker do show this pay pressure,” continued Business Insider.

One important and overlooked factor: “the average hourly earnings are skewed as older, better-paid workers retire and leave the equation.” Going even further, "Average hourly earnings probably is one of our lowest-quality indicators because it doesn't control for changes in composition," Wright said. "Anecdotally, there are wage pressures growing, especially in particular industries and more so in some occupations like data scientists and programmers."

Wages represent the real test of our economic strength and we are not there yet, say some, but then there is still optimism and the not-so greek chorus that have been extolling the banner rate: “Economists, however, remain optimistic that wage growth will accelerate with the labor market near full employment. The unemployment rate, which has declined by 0.7 percentage point since January, is now at its lowest level since December 2000 and below the Fed’s median forecast for 2017.”

For those that watch the Federal Reserve and their anticipated moves, and their mandate, of 2 percent inflation,”October’s job growth acceleration reinforced the Federal Reserve’s assessment on Wednesday that “the labor market has continued to strengthen,” and the sluggish wage data did little to change expectations it will raise interest rates in December.”

“The weakness in wages will not go unnoticed at the Fed, particularly for members that remained more concerned over the inflation outlook,” said Michael Hanson, chief U.S. economist at TD Securities in New York. “Overall, sustained job growth and labor market slack at pre-crisis lows keeps December in play.”

If the outlook seems murky, to naysayers, then the labor participation rate, which measures those workers that hold a job, and those seekers that are searching for one, fell four-tenth of a point and is now 62.7, a rate that has remained virtually unchanged, over the last year.

The New York TImes did note one trend, primarily in professions that don’t require post-secondary education, such as warehouse stocking, and low paying security jobs, that have shown significant pay increases.

Business observers note that some corporations are taking recent savings and reinvesting them in plant and machinery, which leads to increased hiring and higher wages, some as high as 7 percent, affecting a group that President Trump targeted during the 2016 presidential campaign; but it’s too early to tell is whether the recent tax reform bill has had any direct effect.

In certain jobs, and in some geographic areas, such as Indianapolis, the increase has been from 3.1 percent to 5 percent, seen in the second quarter of 2017.

For e-commerce warehouse workers the increase has also been seen, they noted, in such far flung areas as Inland Empire, Ca.; all of which points out that this is not your father’s economy.

More common is that companies are using perks, rather than wage increases, to attract, and retain worker;, finding this easier than prematurely offering higher wages, only to have to pull them back later. Such perks include paying for, or reimbursing the cost of daycare.

Even more common are those that have been shy about wage increases all along, in the post recession era, with its economic uncertainty, despite the optimism of some.

Taking a wider look is the Economic Policy Institute that has seen the flat wages as a barometer of the American economy. They have noted that “On some fronts, the economy is steadily healing from the Great Recession. The unemployment rate is down, and the pace of monthly job growth is reversing some of the damage inflicted by the downturn. But the economy remains far from fully recovered.

A crucial measure of how far from full recovery the economy remains is the growth of nominal wages (wages unadjusted for inflation). Nominal wage growth since the recovery officially began in mid-2009 has been low and flat. This isn’t surprising–the weak labor market of the last seven years has put enormous downward pressure on wages. Employers don’t have to offer big wage increases to get and keep the workers they need. And this remains true even as a jobs recovery has consistently forged ahead in recent years.”

They advise that the Fed hold off on increasing interest rates till nominal wages increase at least from 3.5 percent to 4 percent. They also feel that “there is no threat that price inflation will begin to significantly exceed the Fed’s 2 percent inflation target. And it will take wage growth of at least 3.5 to 4 percent for workers to begin to reap the benefits of economic growth–and to achieve a genuine recovery from the Great Recession.”

Say it again, Sam.