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Jobs Are Booming, and Democrats Are Puzzled
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!
Published in Economics
Labor Force Participation Rate lost ground to 62.7%, compared to 66.2% in 2008. As long as we can keep everyone so demoralized they don’t look for work, we might indeed be able to drive the unemployment rate to below 2%.
The “boom” will keep going so long as it can continue to be propped up with ever-expanding debt. Keep it rolling? Keep those printing presses rolling at the Fed.
Yeah, and that Trump Tax Reduction is just crumbs, not seen by any but the CEOs. Want to buy a bridge? Democrats at the Center for American Progress (?) insist that workers aren’t seeing “broad-based gains”-projecting their blindness onto those Americans who are seeing bigger paychecks every week. They don’t WANT the average citizen to notice that his paycheck goes a bit farther now; so they can keep their voters angry. Funny, but it doesn’t seem to be working.
Our unemployment is lower than our GDP growth.
I oppose tariffs on ideology. But, I think, I’m open to be taught.
Trump is doing such a good job right now I hesitate to fault him on the tariffs. Maybe he’s right on this too. I knew deregulation would be good… and tax cuts… but now comes the hard part… when Trump thinks something against my ideology is the answer. I am puzzled along with Democrats… could my knee jerk reaction be just wrong?
I’m exercising patience… let Trump prove this too, if he can. No one is right all the time, so maybe Trump blows it all with tariffs, or maybe I’ve been taught wrong things… and this will bring back manufacturing.
I do get the steel/aluminum national security… those things are about as essential as food in war time… I’m willing to follow his leadership right now.
I could care less if Canada and Mexico gets their feelings hurt.
I thought that “an economy that continues to work primarily for those at the top” would be privately celebrated by the blue upper-income areas that voted for HRC and who don’t care about the struggling red areas anyway? Is the Center for American Progress just massaging this to discredit Trump &/or to keep their “concern for the poor” type leftist credentials?
Average participation rate was 63% until 2000 when it rose to 68% then fell back to its average under Obama along with other negatives. Participation is driven by lots of things, mostly that we pay folks not to work and it’s hard to pull them out of the welfare and illegal economies as long as it pays more than the working economy. But you’re right it’s still flat and our debt is still growing. To say this recuperation is debt or spending driven however assumes a Keynesian view of how economies work. There is no evidence that such a world exists anywhere at any time. Moreover this expansion started before the tax cuts, the debt grew even faster under Obama. Keynes would call it animal spirits, I’d call it changed expectations and those can vanish if we don’t keep deregulating or if we fall into a trade war.
Should we continue to deregulate and if the expansion moves into flyover land in a big way, or if we systematically decentralize, the elite could take a modest hit in the rate of growth of their wealth, but they’re safe. They do very well and some do phenomenally well, better than the so called robber barons who actually built a country, but a lot of these elite enjoy rent extraction not to mention the new economies of scale of a digital economy, more than creation, especially in finance and high end professionals. The last thing they want is real deregulation they can’t control. The media elite on the other hand, at least the talking heads don’t understand any of it any way.
Doubtless, these are important issues, but I’d like to know how they impact productivity. My layman’s definition is, increasing the amount of output per unit of input.
I take it you mean external costs offset gains from productivity. Firms pay higher taxes and workers expenses equal or exceed wage gains.
Haven’t looked at this in a while, but the reason Barry used to claim good things about unemployment was because people dropped out of the labor force faster than new entrants, keeping the rate down due to sheer math. That entitlement spending went up during 2008-2016 was a significant factor – if it pays more to drop out, why wouldn’t you?
Tariffs are never a good idea. They’re a barrier to trade. If you raise the cost of a good by imposing higher tariffs, demand for it goes down, or transfers to a substitute/inferior good.
The gov’t shouldn’t be in the business of selecting winners and losers. The steel industry is so small in the US as to be negligible, and the reason it’s “vital” for defense is that there are decades-old regulations on the books that force defense contractors to purchase domestically-produced steel. This goes back to WW2-era regulations.
So no, raising trade barriers and artificially increasing costs doesn’t help. That all nations use these tools in one way or another is just an example of clumsy self-interest.
And, if you’re bored, read the Harmonized Tariff Schedule. Good times. Special friends.
No, I don’t like tariffs, but I haven’t heard of any theory or empirical evidence that unilateral (unreciprocated) low tariffs encourage other countries to decrease their own tariffs. Explain to me again why our prize for winning WWII was everlasting high tariffs on our goods exported to Europe?
On productivity, capital investment has gone up since tax reform. Isn’t that likely to increase productivity? Even if it isn’t, I’m not sure what else the federal government can or should do to increase productivity.
Higher wages will drive automatically productivity increases: there are plenty of potential automation projects which do not have good payoffs when you are paying people $X per hour, but which become very attractive when you are paying people $X plus 20%.
“Share or Steal” game theory shows you can only get your stealing-inclined opponent to cooperate by demonstrating that you’ll purposefully blow up the game and be willing to make both parties poorer until he gets it through his skull that cooperation is the only way both players will mutually benefit.
Isn’t it a sad state of affairs that, for some people, good economic news is bad news? The Left, in particular, ends up rooting for bad economic news because their team moves ahead when people suffer economically
The Left should have cheered their little heads off regarding the recent news about low unemployment among blacks. But hardly a cheer was to be heard. Apparently you would rather see your favorite minority suffer than to see your side lose. Sad.
Discussing with my wife yesterday, we wondered “Does a full time Uber driver show up as employed?”
The national security thing is a red herring. The US produces 70% of the steel used in the US. Only 3% of US steel production is consumed for Defense. There is no need to protect the US steel industry. The reason why there are so many less steel jobs in the US is productivity gains, not competition.
Free Trade is a great idea, if only the rest of the world practiced it. We are the only major trading nation that does. We have a trade deficit with every major trading partner. Every single one. That cannot happen unless the rest of the world is not playing by the same rules and they aren’t. We are playing by our own set of Queensbury “free trade” rules and they are playing a dog eat dog game with brass knuckles.
It is an opportune time for a President to be in office that won’t kowtow to the traditional “free trade” mantra, because the trade situation is about to get ugly. Very ugly. Population growth among the high consuming 0-65 year old cohort among the primary consuming nations which today consume 90% pf the world’s goods is slowing to a crawl and in just over a decade, it will start to decline. One should expect economic growth to slow to a crawl too ( and possibly turn negative) with that declining population.
Trade competition is thus going to be far less civil and far more acrimonious because the trade heavy nations like China and Germany may see their economic growth sour horribly and may try even more underhanded measures than we are seeing now. So we may at last have to get serious about growing more competitive and sharpening our trade elbows or our economy may get eaten alive by our underhanded competitors.
Also it should be mentioned that China has gamed the “free trade” agreements we signed with them, utilizing their version of QE to fund massive predatory pricing strategies that have greatly undermined our most competitive industries while at the same time stealing much of our intellectual property through a raft of underhanded measures without any real consequences. They also have scoured the earth to lock down many key raw materials, which they may in end deny to us. Our trade relationship with China may not be sustainable in anything near it’s present form.
On the jobs front, the news actually may be even better. The Household survey recorded a record 904,000 jump in full time jobs coupled with a 625,000 plunge in low quality part time jobs. The Obama years on the other hand were marked by increases in low quality part time jobs and little or no increases in full time employment. So this situation just illustrates that you really need to look “under the hood” of the data to tell what is really going on.
Why are trade imbalances bad? And if the UK is considered a major trading partner, we don’t have a deficit with them.
https://en.wikipedia.org/wiki/List_of_the_largest_trading_partners_of_the_United_States
That the US has capital to spend on items that other nations build (computer components are an obvious commodity here), and that’s imported and re-sold here in the US (and back to other nations, including those supplying component parts), why is that bad? If I buy a sandwich from my local deli, do I now have a trade deficit with them? Why is that bad?
Obviously this growth is the delayed outcome of the Obama stimulus package. And, as Prof. Krugman will no doubt attest, it would have arrived much sooner had the stimulus been four or five times larger.
Also, Trump is unfairly claiming credit for the economic growth due to the peace dividend from pulling out of Iraq and solving the Iran nuclear threat.