One of the big themes in the current presidential race is how decades of free trade have dealt a heavy blow to the American worker as millions of jobs were shipped overseas to take advantage of cheap labor.
The presidential campaigns deserve some credit for finally voicing some of the deep frustrations and anger felt by American workers who have lived for decades in an economy that works for those at the top but not for them and their families.
Thirty years of wage stagnation, the loss of one-third of the nation’s manufacturing jobs since 1970, a failure to generate enough quality jobs and career opportunities for young workers and unacceptable levels of income inequality are now coming home to roost.
More job openings are being posted as companies look for new workers, yet job growth in the private sector remains weak and wholesale goods sales begin to decline. The Department of Labor saw 5.6 million job openings in the month of December, versus expectations of 5.4 and 5.3 in November. The 4.9% rise month over month in job openings is above the historic growth rate, while the total number of job openings remains far above the post-recession average.
The US created fewer jobs than anticipated and the December gain was revised lower. However, the other details were favorable–better than expected. The unemployment rate ticked down to 4.9%, a new cyclical low, despite the rise in the participation rate (62.7% from 62.6%).
Education and skills are important policy levers for sustainable socioeconomic growth. With the right economic fundamentals, a highly educated population with the appropriate skills is a powerful tool for economies to move from the low-income to the middle-income status, or for those already in the middle-income category to avoid the middle-income trap and move to the high-income category.
There is nothing good about the US jobs data. It was simply dreadful. Every metric disappointed, and the August series which so often experiences upward revisions, came in lower. This will raise fresh doubts about the US economy and the ability of the Federal Reserve to raise rates, not just this month, but this year.
Nonfarm payrolls rose by 142k, well below expectations for a 200k increase. With the downward revision in August to 136k, it is the second consecutive month below 150k, a trend not experienced since May-June 2012.
Cognizant that the initial estimate of August nonfarm payrolls habitually disappoints, market participants, and presumably policymakers will look past the low 173k increase, and instead focus on the favorable internals. These include a drop in the unemployment rate to 5.1%, which is into the band the Fed regards as full employment. In addition, the workweek rose to 34.6 hours, matching the cyclical high from a revised 34.5 hours in July. Average hourly earnings rose 0.3% to a 2.2% year-over-year rate.
The key issue today is whether the ADP estimate of US private sector employment growth in April will be sufficient to fuel a dollar recovery. Yesterday’s trade balance blowout prompted downward revisions to Q1 GDP into negative territory. In addition, although the services ISM was better than expected, including an uptick in employment, many investors and the media focused on the Q1 implications.
Why do some people earn more than others? Research backs up the idea that workers with higher educational levels and more experience have higher salaries. And economists would typically explain higher salaries with the argument that these workers are more productive.
With news swirling of the footwear factory strike in Vietnam over the past few weeks it begs the question: Who is ultimately hurt when workers go on strike? The answer: Everyone.
