Friday, November 07, 2014
Job gains and voter anxiety
Comment by Nov. 15, 2014
Only days after many voters complained that the economy was getting
worse, the latest government report on jobs, released Friday, provided fresh
evidence that it was getting better. Employers added an estimated 214,000
jobs in October, the Labor Department found, and the official jobless rate,
bolstered by a big rise in the number of people finding jobs, dropped to 5.8
percent, down sharply from 7.2 percent last October.
The increase, combined with a revision that showed 31,000 jobs were
added to the numbers previously reported for August and September, puts
the average monthly employment gain for the past six months at 235,000 —
an indication, analysts said, that the economy’s progress was gaining
A range of other job measures all improved. More than 683,000 people
reported that they found a job last month, according to a separate survey by
the Labor Department. And the number of people walking away from the
labor market has halted, while the average number of hours worked ticked
The primary disappointment was the lack of wage growth. Hourly
average earnings have remained stuck, rising only 0.1 percent in October, on
the heels of no gain in September. For the year, wage gains are up just 2
percent, barely ahead of the pace of inflation. That lack of progress is likely
to cause the Federal Reserve to move cautiously before raising interest rates
from their near-zero level.
Still, several economist were encouraged by the October numbers.
“Labor force participation actually rose” to 62.8 percent, said Carl
Tannenbaum, chief economist at the Northern Trust Company. “We didn’t
see a drop in employment because people dropped out of the work force. “
Looking back at the changes since last year, Mr. Tannenbaum noted
that there had been a sizable decrease in the number of discouraged
workers, who have given up hope of finding a job — down 1.2 million — and
of part-time workers who wanted full-time employment, down 1 million.
A broader measure of unemployment that includes discouraged job
seekers or those stuck in part-time jobs dropped to 11.5 percent, down more
than 2 points from the seasonally adjusted figure from a year ago. The 5.8
percent official unemployment rate is the lowest since the summer of 2008.
“We think this is a very strong report,” said Michael Gapen, an
economist at Barclays, noting that the number of hours worked was on the
upswing, rising 4.2 percent in the fourth quarter.
This latest report represents 56 consecutive months of private-sector
job growth, which Jason Furman, chairman of President Obama’s Council of
Economic Advisers, characterized this week as “the longest streak in U.S.
Yet, as Mr. Furman and other economic experts readily acknowledge,
the experience of many Americans does not match the growing optimism
about the job market and the overall economy recently expressed by several
Election Day exit polls found that 78 percent of those surveyed were
very or somewhat worried about the future direction of the economy, while
two-thirds said they believed the economy was getting worse.
For many Americans, it still is. Even though the recovery from the
recession is in its sixth year, stagnant wages, an economy generating jobs
mostly at the bottom and the top rather than in the middle, and vast
disparities between the rewards bestowed on the rich and on ordinary
workers have left many people disenchanted with their economic prospects.
Some analysts now see signs that a tighter labor market may lead to
higher wages in the near future. “The job market is steadily picking up pace,”
said Mark Zandi, chief economist at Moody’s Analytics, reacting to a report
from the payroll processor ADP this week that private-sector employment
increased by 230,000 jobs in October.
“The job market will soon be tight enough to support a meaningful
acceleration in wage growth,” he added.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, was
also predicting that “faster productivity growth would drive real wages
higher next year, after a very long wait.”
The question is how much and how quickly.
Over the year, average hourly earnings have risen by just 2 percent, only
slightly ahead of the pace of inflation. “We are adding jobs, but it is still a
wageless recovery,” said Elise Gould, an economist with the left-leaning
Economic Policy Institute, who said she was disappointed by the lack of
progress on wages in October. . “The economy may be growing but not
enough for workers to feel the effects in their paychecks.”
In a report, the institute argued “that wage growth is far below the 3.5
percent rate consistent with the Federal Reserve Board’s inflation target of 2
percent, and far below the 4 percent rate that could easily be absorbed for a
while to restore labor’s share of national income from its current historic
Steve Blitz, chief economist at ITG Investment Research, said the
report’s mixed signals indicated the economy was not necessarily gaining
momentum. “While many tout the pace of job increases so far this year as
signal of a budding strong consumer economy, the details suggest
otherwise,” he noted. Average hourly wages remain stuck, “which continues
the downside pressure on real earnings growth after paying for food,
gasoline and rent.”
The lack of wage growth, particularly at the bottom, helps explain why
ballot measures to raise the minimum wage in Alaska, Arkansas, Nebraska,
Illinois and South Dakota all passed despite widespread losses among
Democrats in those states who supported such measures.
While stagnant wages remain one of the biggest problems in the
economy, the recovery appears to be gaining momentum.
The four-week moving average for new unemployment insurance
claims, considered a more reliable indicator than the week-to-week
fluctuations, hit a 14-year low last week. For the federal fiscal year that
ended on Sept. 30, the number of bankruptcy cases filed in federal courts
dropped 13 percent to 963,739, the lowest since the 2007 fiscal year. And
consumers, bolstered by falling gasoline prices, are more upbeat about job
prospects than at any time in the past six years.
The job gains in the food and service industry noted by the Labor
Department are coming from small-business employers like Matthew
Saravay, who runs Wizard Studios, a special event production company in
Brooklyn. “The economy’s gotten better and people are spending money,”
Mr. Saravay said. “I have interviews lined up, trying to keep up with the
clamor of opportunity. We’re seeing holiday parties return in a way I haven’t
seen in seven or eight years. This is such a paradigm shift from what we’ve
been experiencing for the past half decade.”
Steve Roesner, chief executive officer of Quatro Composites in Iowa,
which produces structures for manufacturers in the aerospace industry,
hired 100 new workers this year, bringing the company’s total staff to 220.
He said he expected to increase his work force 20 percent more next year.
“In our industry, there’s a lot of optimism,” Mr. Roesner said. He attributed
the boom, in part, to technological advances.
Jay Floersch, a solutions architect at Aon Hewitt, a human resources
consulting firm, said business had picked up significantly in recent months.
“We’re exceeding our own forecasts,” he said, noting that “seasonal
hiring is peaking right now.”
Looking ahead, Tara M. Sinclair, an economist at Indeed.com, one of
the nation’s largest sites for job postings, said: “We seem to be reaching a
tipping point in terms of job market maturity. Should this positive trend
continue, we should expect people to stop looking for ‘a job’ and start to look
for ‘the right job. (NYT)