U.S. Jobs Data Remains Gloomy
The U.S. unemployment data for December 2016 came in, and it’s as gloomy as one would expect. The U.S. unemployment rate edged up to 4.7% in December as the U.S. economy added a modest 156,000 jobs. (Source: “The Employment Situation — December 2016,” Bureau of Labor Statistics, January 6, 2017.)
One of the reasons why the U.S. is able to post decent unemployment data is that the participation rate is near historical lows, climbing slightly to 62.7% in December from 62.6% in November. This is a result of millions of American workers who have given up looking for work, and have therefore dropped out of the labor force entirely. A record 95.10 million Americans are not in the labor force, up from the November 2016 record of 95.08 million.
All in all, the country continues its glacial trend of so-called growth with overly optimistic economists, who are normally always wrong it seems, expecting the U.S. economy to make room for 175,000 jobs.
Commenting on the jobs data, Secretary of Labor Thomas Perez said triumphantly: “The U.S economy again demonstrated its strength in December.” It’s fair to say that Perez’s comments are a nod to President Barack Obama and the wonderful state he left the U.S. economy in, ahead of Donald Trump’s inauguration on January 20. (Source: “Statement of US Labor Secretary Perez on December Employment Numbers,” United States Department of Labor, January 6, 2017.)
Unfortunately, the December jobs report doesn’t really live up to the hype. In fact, the quality of jobs created are entirely underwhelming, and wage growth is lagging. A breakdown of the data shows that the biggest area of growth was from the service industry, with 132,000 jobs added.
The second biggest area of growth was “Professional and Business Services,” with 30,500 jobs. A third of these jobs were in “Administrative and Waste Services” to “Buildings and Dwellings.”
“Leisure and Hospitality” continued to add big numbers to the rank-and-file of low-paid part-time workers. Employment in food services and drinking places added 30,000 in December. Over the last two years, the U.S. economy has made room for 600,000 waiters and waitresses. In 2016 alone, manufacturing employment fell by 45,000.
Approximately 5.6 million Americans work part-time but want full-time work. An improvement since the Great Recession, yes, but seven years into the so-called recovery and that number is still well above pre-recession levels of 4.4 million. The underemployment rate is at 9.2%.
Wage Growth Lags
Aside from the highly paid financial sector, wage growth is another area of disappointment for the average American. Unless you talk to Thomas Perez, who said, “The wage growth is the best we have seen during the recovery; that is the most important part of this report.” (Source: “This is the ‘best wage growth we’ve seen in the recovery,’ US Labor Secretary Thomas Perez says,” CNBC, January 6, 2017.)
On the plus side, average wage growth for all private-sector employees rose 0.4% in December, or around $0.10 per hour month-over-month. This translates into an annual increase in nominal wages of 2.9% in 2016. This represents the largest annual wage increase since the end of the recession in 2009.
But this hardly balances out the anemic job growth, and it is a narrow view of wages. The increase in wages in 2016 is well below the more-than-3.5% to 4.0% annual wage growth that is needed, for several years, to make up for all the wages lost during the Great Recession. (Source: “Nominal Wage Growth Tracker,” Economic Policy Institute, last accessed January 9, 2017.)
In November 2007, the month before the official launch of the Great Recession, the year-over-year wage growth rate was 3.89%. Interestingly, the year-over-year monthly wage growth during the Great Recession was higher than at any point during the recovery, never falling below 2.9%.
If quality and quantity is important when it comes to jobs data, and wage growth is important for affordability, then the U.S. is failing on all fronts.