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Is it overstating things to say the US economy is, well, booming? After all, the May jobs report was pretty impressive, including a) 223,000 new jobs, b) an uptick in average hourly earnings growth to 2.7% from a year ago, c) a downtick in the jobless rate to 3.8% — at 3.755% unrounded, the lowest since 1969 — and d) a two-tenths decline in the U6 underemployment to 7.6% — its lowest level since 2001. JPMorgan economist Michael Feroli titled his Jobs Friday report this way (while alluding to President Trump’s controversial pre-report tweet): “The secret’s out: job growth is booming.” And some economists think a jobless rate with a two-handle is hardly out of the question.
True, overall economic growth is still stuck in Two Percentland. That’s the other, less-encouraging two-handle. But maybe not for much longer. GDP estimates for the second quarter are rising across Wall Street, and this report may boost that momentum. “Nearly all aspects of this report were positive and consistent with solid growth of wage-and-salary income in the second quarter,” notes the IHS Markit econ team. “The details in this report added one-tenth to our forecast of Q2 GDP growth, which now stands at 4.1%.”
Now superfast growth isn’t sustainable — deficit-financed fiscal stimulus will fade — unless we eventually see higher productivity growth, and that doesn’t seem to be happening yet. (Though there is AI-driven reason for optimism on that front.) The 1990s boom was particularly notable in that it was driven by massive productivity gains. But other than productivity growth — and I don’t mean to skip past it — how else would a boom skeptic quibble with the US economy right now? Probably like this analysis from left-learning Center for American Progress:
… workers still are not seeing the broad-based gains we expect from an economy that has been growing the top line for such a long time. It’s positive news that more Americans continue to find work; it’s troubling that we’re seeing fairly meager gains for those already employed … It’s tempting to read this month as another data point in an economy that continues to work primarily for those at the top.
That seems too pessimistic. As former Obama economist Jason Furman tweeted this morning: “ … it is notable that average hourly wages for production and non-supervisory workers (which excludes managers) is up 2.8% over the last twelve months, which is faster than the 2.7% increase for all private wages.” And this isn’t a new story, as Americans with only a high-school diploma have for some time been seeing faster earnings growth than their counterparts with a college degree or higher, “as employers in low-wage industries hungrily search for workers to fill job openings,” notes The Wall Street Journal.
Moreover, it should matter that the expansion is greatly benefiting less-educated Americans by creating gobs of jobs. “By education level, the less-educated continue to have the biggest gains,” noted Dean Baker of the Center for Economic and Policy Research. “The unemployment rate for all three categories of workers with less than a college degree is down by 0.8 percentage points from year-ago levels, compared with 0.3 percentage points for workers with college degrees.”
But none of that stuff fits a narrative that the US economy has been so transformed by globalization and technology that it is now structurally impossible for there to be broad-based gains without significant government intervention (e.g., big minimum wage hikes; a federal jobs guarantee or guaranteed government income; antitrust action, especially against Big Tech). Maybe the sounder political path would be to argue against the stuff that threatens the expansion — such as needless trade conflicts and cronyist government intervention — and argue for policies to boost long-run productivity, such as entitlement and blue-state housing reform. Call it a boom or a boomlet or even just a long-running expansion, let’s keep it rolling!