Friday, July 7, 2017

Another jobs nothing burger

As I said two months ago about the April jobs number (April jobs: a nothing burger), today's June jobs report doesn't change the big picture at all, even though it was touted as an upside surprise (+222K vs. +178K). The best that can be said about the jobs market is that the rate of growth of private sector jobs—which was roughly 2% by the end of last year but which has slowed to 1.7% of late—has stopped declining. With jobs growth of 1.7% and productivity of 0.5% or so, real GDP is likely going to average a little over 2% for the foreseeable future. Which is what it has been doing since mid-2009. These two charts tell you all you need to know about the jobs market:

Private sector jobs are the ones that really count. They've increased by about 175K per month over the past year. That's substantially less than the 240K per month we enjoyed in the 1997-99 period. And the rate of growth has been trending downward at a modest rate over the past year or two.

The best jobs growth we've seen over the past 15 years or so was just over 2% per year. Currently, private sector jobs are growing at a 1.7% pace. Nothing to write home about, but not exactly a disaster either. 

The reason this has been a tepid recovery is that we've had weak jobs growth on top of very weak productivity growth, and both are explained by a dearth of productive investment. To be sure, corporations have generated significant profits in the current recovery, but most of those profits ended up funding the federal government's voracious appetite for debt. I explained this three years in this post.

What happened to all the profits? Almost all of the most incredible surge in profits in modern times was squandered by our government, flushed down the Keynesian drain.


Benjamin Cole said...

Nice post.

There are actually some good signs in the jobs report, at least arguably.

We are seeing greater labor force participation rates, which is actually driving reported unemployment rates up.

More people working is good!

Wages are still dead. While I would prefer real wages rising, the dead-wage picture tells us there is plenty of slack in labor markets, and the Fed can ease back on its hysterical squeamishness about "tight labor markets."

The Fed has been citing "labor shortages" in minutes and reports for more than a year now.

Interestingly, the Reserve Bank of Australia and the Bank of Japan have been chiding industry to give bigger pay raises.

The Fed should probably consider not more rate hikes, but how to spur more economic growth. This recovery is sluggish and has many legs left.

The largest structural impediment to growth remains property zoning. The Fed cannot do much about that, but it would be nice if they at least held some seminars or pointed out the big crimp that zoning is playing in growth.

Johnny Bee Dawg said...

Repeal ObamaCare. Cut tax rates and idiotic regulations, and get on with it. Make Medicaid only for the poor. Separate the charity cases in healthcare, and let free market competition for customers sort out the rest. Markets and productive citizens are begging for it.
More people will get back to work, and things would accelerate.
Will never happen as PUBs will preserve ObamaCare.

Relative strength winners are screaming and America is so pent up from 8 years of pure idiocy. We The People are ready to go. PUBs need to get out of the way.
God Bless Trump. Let's go.

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Frozen in the North said...

Just a comment on the GOP's Obamacare's replacement efforts; its not be years its been YEAR...Anything before that was posturing. anyway, still not convinced that they GOP has the strength or ability to do anything