Where are the Wages?
Job Search Station (Photo: Reuters)
The November jobs report released by the Labor Department on Friday showed the U.S. added 211,000 jobs, slightly beating the media forecast for 200,000. The labor force participation rate at 62.5% remained unchanged at its 37-year low and the unemployment rate held steady at 5%.
“The Fed only needs one average report to finally raise interest rates on December 16 after seven full years of near zero,” David Kelly, chief global strategist at J.P. Morgan Funds, said.
Among the major worker groups, the unemployment rates for adult men (4.7 percent), adult women (4.6 percent), teenagers (15.7 percent), whites (4.3 percent), blacks (9.4 percent), Asians (3.9 percent), and Hispanics (6.4 percent) showed little or no change in November.
The number of long-term unemployed–or, those jobless for 27 weeks or more–was unchanged at 2.1 million in November and, in fact, has not shown movement since June. These individuals accounted for more than a quarter (25.7%) of the unemployed this month. Further, the less-cited but arguably more important employment-population ratio was unchanged at an abysmal 59.3% and also has shown little movement since October 2014.
“We’ll also be looking for stronger wage growth as proof of an improved economy,” Tara Sinclair, chief economist at job site Indeed, said prior to the report. “After years of stagnant wage growth, we finally saw the increase we were looking for in last month’s numbers. But that is only one month of data and these numbers can be volatile.”
Unfortunately, wage growth in the November jobs report was mixed. The Labor Department said average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $25.25, down from a 9-cent gain in October. Over the year, average hourly earnings have risen by just 2.3%. In November, average hourly earnings of private-sector production and nonsupervisory employees, at $21.19, changed little.
Wages have been stagnant in large part due to the economy’s shift toward part-time positions. The number of persons employed part time for economic reasons–also sometimes referred to as involuntary part-time workers–increased by 319,000 to 6.1 million in November, breaking the trend in modest declines over the prior two months. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.
Meanwhile, opportunity in traditionally higher-paying sectors either flat-lined or decreased. Employment in mining continued to decline (-11,000) under the pressure of burdensome government regulation, with losses concentrated in support activities (-7,000). Since December 2014, employment in mining has declined by 123,000. The Labor Department’s November jobs report showed information lost 12,000 jobs. Within the industry, employment in motion pictures and sound recording decreased by 13,000 in November but has shown little net change over the year.
Employment in other major industries, including manufacturing, wholesale trade, transportation and warehousing, financial activities, and government, changed little over the month.
The Institute for Supply Management (ISM) Manufacturing Business Survey fell to 48.6 in November from 50., well below expectations for a reading of 505. While PPD has reported numerous times on regional activity contracting, the survey now indicates the manufacturing sector nationwide is shrinking.
