2019 ends with a repeat of low wages for U.S. job market

The December Jobs Report for 2019 on Friday was supposed to be another hurrah moment of the U.S. economy, and a mainstay for President Trump’s reelection campaign in what has now become a familiar chess game to advance the board to rally the base.

It was also supposed to provide a greater and steadying influence to that mythical “unseen hand” of laissez faire economics, proving that the nation was well on its way to underscore a reversal of fortune from the Great Recession.

In one fashion, it did: unemployment was at 3.5 percent, but only 145,000 jobs were gained said the U.S Bureau of Labor and Statistics, just enough to sustain reasonable job growth, but not enough for a total surge but leaving any moves by the Federal Reserve to make a change in interest rates.

145,000 does not a revolution make, and “Inclusive of revisions, payrolls increased by 2.1 million overall in 2019 and averaged about 176,000 per month, representing the slowest pace of job additions since 2011. In 2018, job gains had averaged at 227,000 per month,” reported Yahoo Finance.

That alone, was a downer for some economists, bankers and market observers, but in this middling report there was some cause for relief, if not outright joy, because the the better gauge, the U-6 underemployment rate “which also includes discouraged workers no longer seeking jobs and part-time employees seeking full-time work” fell to 6.7%.

As Yahoo Finance noted, “This level was lower than any point since at least 1994, or as far back as Bloomberg data tracks. Peter Tchir, head of macro strategy for Academy Securities, called this “the one impressive number” in Friday’s report.”

If there was a soundtrack for December, it might be Peggy Lee crooning, “Is That All There Is,” with wages still taking a downward trend, and bobbing up occasionally, for a small gasp of air, but with a yearly round out of only 2.9 percent over the year, this makes for an uneven report, at best, and as we have shown before, robs some, while paying some others, and defying economic standards that say wages should trend higher for a tight labor market.

“It’s easier to get a job than a raise in this economy,” said Diane Swonk, chief economist at Grant Thornton to The New York Times.

“Consumer spending is a pillar of the economy, and it depends on income growth. Over the past 12 months, wages grew just 2.9 percent. That was substantially below the 3.3 percent average in 2018,” they added.

“Something that the Fed has been humbled by is how little wage acceleration there’s been,” Ms. Swonk said, referring to the Federal Reserve.”

The good news, tempered by higher housing and medical costs, is “The labor squeeze has helped workers at the lowest end of the pay scale, giving their wages a push that exceeds the average increase. Minimum-wage increases across 21 states and 26 cities and counties this year could further help pull up paychecks at the bottom,”

Before Friday’s report ING said that the “The Labor market slack is greater than the unemployment figure alone’ meaning wage growth will remain subdued.”

Adding to Swonk’s statement, they opined that, “Having peaked at 3.4% year on year in February, wage growth has edged lower through 2019 despite the unemployment rate being at the lowest level since the late 1960s.

Conventional wisdom, according to the Federal Reserve’s Beige Book, “the vast majority of Districts continued to note difficulty hiring driven by a lack of qualified applicants as the labor market remained very tight.”

One theory the Times proposed: “One argument is that companies are satisfying workers with improved benefit packages – medical, pensions, vacation days – and are being more restrictive on salaries. However, according to the employment cost index report, benefit growth is in fact underperforming wage & salary growth.”

While no one can break out the booze, as the lyrics suggest, but since consumer spending is the backbone of the U.S. economy, there are bound to be concerns, even with forthcoming revisions.

From an analytical stance, ING added, “if we look at employment as a proportion of working age population we see that while the ratio has been improving, it remains well below the pre Global Financial Crisis peak and is in fact still below the levels experienced in the recessions of the early 1990s and the early 2000s.”

Moving to labor force participation, we see some sidelined action, that was not intended, since the increase, again, not at pre-recession levels, has moved some off the bench, and according to The New York Times, “Nearly three-quarters of new hires have come off the sidelines.”

“The unemployment rates for groups that have tended to receive a smaller share of the expansion’s rewards — high school dropouts, African-Americans and Latinos — have also dipped since December 2018,” they stressed.

“Many of the new entrants have been women, who now make up a majority of the nonfarm payroll for the first time in nearly a decade and dominate sectors that are expanding fastest, like health care,” but these are still in more traditionally female roles, such as nurses, home health aides, what another generation called “Pink Collar Jobs.”

“Their participation in the labor force, though, still lags rates in most European countries, which tend to offer better parental leave and child care options,” showing that America still has a long way to go for social and economic equity, and despite the increase in November’s LFP of 63.2 and the hint in May of 62.8, there is a drop back to 3.5.

Some economists see these women, who are at their peak earning years from 25 to 54 years old, are by their mere presence, offer a modicum of assurance, even while controlling for their European counterparts.

There is good news however, and a hit was the hiring peak in retail of 41,000 jobs, plus the aforementioned gains in health care of 28,000, and the addition of  leisure and hospitality of 40,000 jobs, for December. But, recent store closings, such as Bed Bath and Beyond, and Macy's, among others, could reverse those gains.

On the down side was manufacturing, losing at 12,000, but construction did increase to 30,000, according to an analysis of new government data by the Associated General Contractors of America, but Labor reported it nearly unchanged at 20,000.

Not so fast say others, even with a helicopter view of December, “Mining and manufacturing also struggled. Industrial goods and automobile manufacturers were the hardest hit, in part because of the trade war, said Andy Challenger, a vice president at Challenger, Gray & Christmas, a Chicago based outplacement firm that tracks layoff announcements,” in Chicago, in an interview with the Times, and Bloomberg News Report.

He also pointed out, as seen above, that people are still getting laid off and losing their jobs.