April Jobs Report: Is American Capitalism Still Broken? Asking for a Friend.

 

If you want to find bad news in the April jobs report, it’s there to find. I mean, something is always there. And this report is no different. The labor force shrank, and the participation rate declined. Hours worked declined. Manufacturing job growth was just meh. The increase in average hourly earnings rate was less than expected. And while the 3.6% unemployment rate is the lowest since 1969, the broader U-7 rate of 7.3% is only the lowest since 2001.

But, gang, that 3.6% jobless rate is the lowest in 50 years, since humans first stepped foot on the Moon. And as the expansion nears its tenth anniversary, the economy is still generating gobs of jobs — 263,000 last month and a monthly average of 205,000 through the first four months of this year.

Sure, wage growth seems more solid than spectacular. But as the White House noted, the 3.2% gain in average hourly earnings over the past year means real wages continue to grow given the under-2% inflation. (Indeed, wage growth was fastest in low-wage industries, noted analyst Martha Gimbel of the Indeed Hiring Lab.) “We see no reason to downplay the strength, apart from the usual caveat about month-to-month fluctuations,” is how Goldman Sachs sums things up.

Even better, the strong employment comes on the heels of a strong productivity report. As I noted on Thursday, productivity increased at a rapid 3.6% annualized during the first three months of this year. On a year-ago basis, this put productivity growth at 2.4%, the fastest pace since early 2010 and far better than the 1% pace that has typified the post-financial crisis expansion. As Barclays economist Blerina Uruçi told The Wall Street Journal, “That means we can grow at a faster pace on a more sustained basis. It also means the economy can run hotter for longer without causing inflationary pressure.” Moreover, consistent 2%-plus productivity growth makes a 3% real GDP economy less of a stretch.

Of course, none of this means the US economy is suddenly recession-proof. And that low unemployment in 1969 was followed by a recession through most of 1970. And perhaps the productivity boomlet reflects a fakeout rather than breakout.  (“The supply side of the economy—which appeared quite favorable after [Thursday’s] productivity number—looks a little less shiny in light of the decline in the participation rate,” wrote JPMorgan’s Michael Feroli in a report.) But strong advocates of “broken capitalism” theories about wage and technological stagnation shouldn’t overlook or reflexively explain away this encouraging real-time data.

Published in Economics
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  1. Petty Boozswha Inactive
    Petty Boozswha
    @PettyBoozswha

    Why is the decline in the participation rate always portrayed as negative? It just means the malcontents, severe weirdos, alcoholics and druggies are voluntarily getting and staying out of the workforce and living in mom’s basement.

    • #1
  2. Stad Coolidge
    Stad
    @Stad

    James Pethokoukis: If you want to find bad news in the April jobs report, it’s there to find. I mean, something is always there.

    There’s always a cloud behind every silver lining, right?

    • #2
  3. Steven Seward Member
    Steven Seward
    @StevenSeward

    Pethokoukis has an odd penchant for publishing undecipherable graphs.  The numbers at the bottom look like they should be the last two digits of years in the 21st Century, but the title says “Monthly Change in Employment.”  And what do the numbers at the sides (the y-axis) mean?

    • #3
  4. PHCheese Inactive
    PHCheese
    @PHCheese

    “Still”, I never knew it was ever broken.

    • #4
  5. Hoyacon Member
    Hoyacon
    @Hoyacon

    Petty Boozswha (View Comment):
    Why is the decline in the participation rate always portrayed as negative? It just means the malcontents, severe weirdos, alcoholics and druggies are voluntarily getting and staying out of the workforce and living in mom’s basement.

    Maybe not.  The Bulwark is hiring.

     

    • #5
  6. Steven Seward Member
    Steven Seward
    @StevenSeward

    Hoyacon (View Comment):

    Petty Boozswha (View Comment):
    Why is the decline in the participation rate always portrayed as negative? It just means the malcontents, severe weirdos, alcoholics and druggies are voluntarily getting and staying out of the workforce and living in mom’s basement.

    Maybe not. The Bulwark is hiring.

    If the decline in the Labor Participation Rate was due to more couples marrying and the wife staying home to take car of the kids, then it could be a good thing.  However, the actual reason over the last decade  has been more and more people quitting work and going on welfare.  This trend has slowed down and even slightly reversed since Trump got elected, but I’m not sure why last month’s Labor Participation Rate shrank.

    • #6
  7. Eridemus Coolidge
    Eridemus
    @Eridemus

    Remember,  Pelosi explained it all away recently, saying something like “sure, people have jobs but they are still uncertain whether they will have one tomorrow.” How that enlightens us about anything is unclear, and mainly just shows having nothing of value to say. Wasn’t that always true, but even more when the economy stagnates? Doesn’t that worry fade a bit in a rising economy where you are more likely to be able to replace anything you lose?

    • #7
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