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The Job Market May Have Some Room to Run After All The Job Market May Have Some Room to Run After All
(35 minutes later)
Over the last few months, incoming numbers on the job market made it look as if the United States were closing in on full employment — the state where very nearly everyone who wants a job has one, and efforts to boost the economy further just create inflation.Over the last few months, incoming numbers on the job market made it look as if the United States were closing in on full employment — the state where very nearly everyone who wants a job has one, and efforts to boost the economy further just create inflation.
The June numbers released Friday are a big “not so fast” moment for that theory.The June numbers released Friday are a big “not so fast” moment for that theory.
In their particulars, the latest numbers are more consistent with an economy that has some room to run. This economic expansion, now eight years old, may have some life in it yet.In their particulars, the latest numbers are more consistent with an economy that has some room to run. This economic expansion, now eight years old, may have some life in it yet.
If the economy were at full employment, we would expect the rate at which employers were adding jobs to slow down. You can’t add workers to your payrolls if there are no workers to take those jobs. And as recently as a month ago it appeared that job growth was slowing — not in an alarming way, but in the way you might expect in a job market becoming tight. If the economy were at full employment, we would expect the rate at which employers were adding jobs to slow down. You can’t add workers to your payrolls if there are no workers to take those jobs. And as recently as a month ago it appeared that job growth was slowing down — not in an alarming way, but in the way you might expect in a job market that was becoming tight.
Never mind. In June, the nation added 222,000 jobs, and previous months’ job growth numbers were revised up by a combined 47,000. That was enough to push the average monthly job gains for the first half of 2017 to 180,000, basically the same as the 187,000 average in 2016. It had seemed that job growth was decelerating this year, but that no longer appears so (or at least, if it is so, we’ll need a few more months of data to prove it).Never mind. In June, the nation added 222,000 jobs, and previous months’ job growth numbers were revised up by a combined 47,000. That was enough to push the average monthly job gains for the first half of 2017 to 180,000, basically the same as the 187,000 average in 2016. It had seemed that job growth was decelerating this year, but that no longer appears so (or at least, if it is so, we’ll need a few more months of data to prove it).
Part of the reason this strong job growth is taking place despite a low unemployment rate is that there were, in June at least, more people coming into the labor force. One of the most disappointing results in the May numbers was a sharp drop in the number of people in the labor force, but it looks to have been a statistical aberration, almost completely reversing itself in June.Part of the reason this strong job growth is taking place despite a low unemployment rate is that there were, in June at least, more people coming into the labor force. One of the most disappointing results in the May numbers was a sharp drop in the number of people in the labor force, but it looks to have been a statistical aberration, almost completely reversing itself in June.
With the unemployment rate relatively low — 4.4 percent in June — future growth in employment will need to come not from people who are actively looking for a job today, but from pulling people into the job market who aren’t working or looking for work at all today. With the unemployment rate relatively low — 4.4 percent in June — future growth in employment will need to come not from people who are actively looking for a job today, but from pulling people into the job market who currently aren’t working or looking for work at all.
The overall trend in 2017 isn’t great on that front. The civilian labor force has increased by only 84,000 people a month on average, down from 140,000 in 2016. But the June numbers are at least some assurance that things aren’t as bad as the May numbers suggested and that there continue to be potential workers out there who might join the labor force if the economy were truly humming. The overall trend in 2017 isn’t great on that front. The civilian labor force has increased by only 84,000 people a month on average, down from 140,000 in 2016. But the June numbers are at least some assurance that things aren’t as bad as the May numbers suggested and that there continue to be potential workers out there who might join the labor force if the economy truly hums.
Which brings us to a third area in which the data point to some room for further improvement in the jobs picture. Wage growth showed no sign of improvement in June — average hourly earnings rose 0.2 percent and are up 2.5 percent over the last year. Those numbers aren’t horrendous given low inflation, and aren’t shocking given low growth in labor productivity. But they hardly point to an environment where employers are so desperate for workers that they are, in the aggregate, getting into bidding wars for their talents. Which brings us to a third area in which the data point to some room for further improvement in the jobs picture. Wage growth showed no sign of improvement in June; average hourly earnings rose 0.2 percent and are up 2.5 percent over the last year. Those numbers aren’t horrendous given low inflation, and aren’t shocking given low growth in labor productivity. But they hardly point to an environment where employers are so desperate for workers that they are, in the aggregate, getting into bidding wars for their talents.
Indeed, the 2.5 percent annual growth in hourly earnings is consistent with the pattern in place for years now. It is neither an acceleration nor a deceleration. In any market, you expect that when something is getting scarce, its price will rise more quickly. The fact that wages — the price of labor — are not rising more quickly is a good hint that labor is not as scarce as the 4.4 percent unemployment rate might suggest.Indeed, the 2.5 percent annual growth in hourly earnings is consistent with the pattern in place for years now. It is neither an acceleration nor a deceleration. In any market, you expect that when something is getting scarce, its price will rise more quickly. The fact that wages — the price of labor — are not rising more quickly is a good hint that labor is not as scarce as the 4.4 percent unemployment rate might suggest.
And while unemployment rose for good reasons in June — people entering the labor force — the simple fact that not all of those new entrants were immediately snapped up by employers is a hint that there may be some slack remaining in the job market. The broader measure of unemployment known as U-6 rose even more, reversing a drop in May and rising to 8.6 percent from 8.4 percent. And while unemployment rose (from 4.3 percent) for good reasons in June — people entering the labor force — the simple fact that not all of those new entrants were immediately snapped up by employers is a hint that there may be some slack remaining in the job market. The broader measure of unemployment known as U-6 rose even more, reversing a drop in May and rising to 8.6 percent from 8.4 percent.
Job creation is more robust than it had seemed, while wage growth is soft and the labor force is growing. It would be a mistake to make too much of one month’s numbers, but for now the numbers support optimism that the labor market has room to get better — with higher wages for more workers — before it gets worse.Job creation is more robust than it had seemed, while wage growth is soft and the labor force is growing. It would be a mistake to make too much of one month’s numbers, but for now the numbers support optimism that the labor market has room to get better — with higher wages for more workers — before it gets worse.