The Bureau of Labor Statistics reported Friday a gain of 170,000 seasonally adjusted new private-sector jobs in July, but there was a loss of 13,000 public sector jobs, bringing the total gain to 157,000. That was far below the 190,000 gain that the consensus of experts expected. The headline unemployment rate fell to 3.9 percent. July’s gains marked the 94th consecutive month of overall job growth.
In each month’s report, having obtained additional data, the BLS revises its figures from the previous two months. June’s gains were revised from 213,000 to 248,000 and May’s from 244,000 to 268,000.
Each month’s jobs gains or losses are calculated by analyzing the Current Employment Survey of 147,000 business establishments. The unemployment rate is calculated from a different report, the Current Population Survey of 60,000 households.
The BLS labels as U3 its headline rate of unemployment but also calculates a rate it calls U6. This measures “labor underutilization,” accounting for both unemployment and underemployment. In July, U6 fell to 7.5 percent. Before the Great Recession began, the U6 low point was 8 percent in March 2007. In mid-2001, it reached its lowest point since the bureau began using it: 6.9 percent.
The civilian workforce rose by 105,000 in July after rising 601,000 in June and 12,000 in May. The labor force participation rate remained unchanged at 62.9 percent in July, and the employment-population ratio rose 0.1 to 60.5 percent.
Once again wages made little headway. On a year-to-year basis, average hourly wages for all employees have risen 71 cents an hour, or 2.7 percent. But the current level of inflation (as of June) is 2.87 percent. Which means workers lost ground. Nelson D. Schwartz at The New York Times reported:
“People keep wondering when that magical kink will occur and wages will turn on a dime,” Ms. Zentner said. Not yet, she predicted. Although the low unemployment rate has produced pockets of labor shortages, she said, “it’s not economywide.”
Why wages aren’t picking up in spite of the job gains is a question that has gathered numerous, often contradictory explanations. On Tuesday, Jason Furman took a look at wages at Vox:
A variety of explanations have been proposed: Perhaps wages lag because there’s more labor market “slack” than there appears to be (the result of low labor force participation), or employers may be wielding new market clout against workers, or the trend could be a byproduct of the fact that wages are still effectively adjusting from the recession. Or perhaps inequality itself produces a dynamic that drives down wages.
My interpretation of the wage puzzle produces a different answer: This is simply what a high-pressure economy looks like when productivity growth rates and inflation are both relatively low. Some of the other explanations — including inequality, an especially popular answer these days — appear to point in the wrong direction. For instance, despite what you may have heard, economists broadly accept that in the past few years, wage growth has actually been stronger at the bottom than at the top. [...]
It is a mistake to think that the deck is so stacked against workers that any gains in efficiency will just go to increased corporate profits. In fact, the biggest problem for wages in recent years has not been that corporations are getting all the gains but that the gains are not nearly large enough overall.
Josh Bivens at the Economic Policy Institute responded, noting:
Furman is quick to note that his outlook does not demand rapid policy tightening to rein in growth. I’m definitely happy he says this. However, I do think any argument that concludes that the U.S. economy is unambiguously at full employment, and that the labor market is even tighter than the late 1990s, is going to give succor to those calling for the Federal Reserve to continue raising interest rates briskly to rein in growth.
This would be a mistake, and Furman’s arguments should certainly not sway anybody to call for continued policy tightening. He makes some good points, but I think he misreads what low inflation and low productivity are telling us. They are not just background variables that we have to take as given and adjust our wage expectations accordingly. Instead, low inflation and low productivity should be seen as signs of slack in and of themselves.
A primary reason for the failure of wages to rise faster—the weakness of unions—gets barely a mention by Furman and then is pooh-poohed. Bivens doesn’t mention unions directly but his analysis reflects a more worker-centric point-of-view.
Jared Bernstein, chief economist and economic adviser to Vice President Joe Biden who has been a Senior Fellow at the Center on Budget and Policy Priorities since 2011, also takes a lengthy look at wages:
Q: Is there a wage problem in the current labor market?
A: There is, as real wages for middle-wage workers, as in today’s data, are flat (growing at about the same rate as inflation), meaning the only way working families can grow their incomes is working more hours.
Q: Is that a function of slow nominal wage growth or faster inflation?
A: It’s really about faster inflation, most recently, as the figures below reveal (more figs to come–tech difficulties). They plot the yearly growth rate of the mid-level wage against inflation (I’ve forecasted the July inflation value as it’s not out yet). The difference between the wage and the inflation lines represent real growth. As you see in this figure for an important sector for mid-wage workers–health care and education– inflation grew from very low levels and has caught up with pay rates in the sector.
Here are some more details from the July jobs report:
Unemployment rates differ by race and sex. [Percentages in brackets are for June]. Adult men: 3.4 percent [3.7]; Adult women: 3.7 percent [3.7]; Whites: 3.4 percent [3.5] ; Blacks: 6.6 percent [6.5]; Asians: 3.1 percent [3.2]; Hispanics: 4.5 percent [4.6]; American Indians: (not counted monthly).
• Average hourly earnings of private-sector production and nonsupervisory employees rose in July by 3 cents an hour to $22.65.
• Average hourly earnings for all employees on private non-farm payrolls in July rose 7 cents an hour to $27.05.
• Average work week for all employees on non-farm payroll fell to 34.5 hours in July.
• The manufacturing work week in July remained unchanged at 40.9 hours.
July Job Gains and Losses for selected categories:
- Professional services: 51,000
- Temporary help services: 27,900
- Transportation & warehousing: -1,300
- Financial activities: -5.000
- Leisure & hospitality: 40,000
- Information: 0
- Education and health services: 22,000
- Health care & social assistance: 33,500
- Retail trade: 7,100
- Construction: 19,000
- Manufacturing: 37,000
- Mining and Logging: -4,000
Here's what the seasonally adjusted job growth numbers have looked like in the previous decade compared with this July’s gain of 157,000 jobs.
July 2008: -213,000
July 2009: -342,000
July 2010: -78,000
July 2011: 72,000
July 2012: 156,000
July 2013: 111,000
July 2014: 196,000
July 2015: 256,000
July 2016: 325,000
July 2017: 190,000