The hidden truth about job growth, lost amidst the statistical noise & optimists’ hopes

Larry Kummer, Editor

11 years ago

Summary: The key thing to know about the latest job report is the same thing to know about all 2014’s job reports: there has been no change to the trend. No sign of the acceleration so confidently forecast by so many. This confirms the other economic indicators, amidst the slowing world economy. Leave the analysis of the minutia to specialists; the big picture is important and easy to see. Because the expansion grows old, and the next recession approaches (especially with the Fed determined, for good reason, to normalize interests beginning next year).

“Significant monetary stimulus, the end of fiscal austerity, a booming housing market, a cheap dollar, record corporate cash balances — if the US economy does not significantly accelerate in the coming quarters, it never will. We assume it will …”

— Michael Hartnett (Chief Strategist, Bank of America), 12 September 2013 (red emphasis added)

The core economic statistics for the US are jobs and wages (these are coincident indicators, showing where we were in the last few months). As I (and others) have reported, the predictions of optimists and pessimists alike have been wrong during the past 5 years. The US has grown steadily by most metrics at roughly 2% per year. Slow, especially with the gains going largely to the 1% (hence the GOP wins, bringing them control of most elements of the US Federal and State government machinery).

Here is the monthly nonfarm jobs growth (SA). Do you see a boom in 2014? The second half of 2014 (after an unexpected winter slowed Q1 growth)? This month’s “strong” report resulted from “America’s Sudden Fascination With Hiring Young Women” as waitresses.
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Let’s smooth out those wiggles. Here is the same data, but the year-over-year changes, NSA, during the past 10 years. Looks like we’re at peak job growth. Is that good or bad?

Let’s compare the past 10 years with the post-war period of real growth. Same data, YoY, NSA. The new century has been pretty weak for American workers, despite years of unprecedented fiscal and monetary stimulus (slowly winding down).

Now for the bad news: wages, a long sad story. No sign of acceleration during the past five years (SA data, YoY).

But why should we expect growth in real wages? Real wages have been roughly flat since 1970. All the gains from America’s growth have gone to the 1%.