The payroll report for August 2017 thoroughly disappointed. The monthly change for the headline Establishment Survey was just +156k. The BLS also revised lower the headline estimate in each of the previous two months, estimating for July a gain of only +189k. The 6-month average, which matters more given the noisiness of the statistic, is just +160k or about the same as when the Federal Reserve contemplated starting a third round of QE back in 2012.
Even I had expected that there would be some improvement in the labor market trend by now. The near-recession of 2015-16 finished nearly a year and a half ago, and though labor conditions typically lag the overall economic direction, more than enough time has passed to have been afforded the opportunity. Instead, the trend of the BLS’s payroll reports since the “rising dollar” matches pretty well other economic accounts including, importantly, the BEA’s estimates for national income.
The only improvement in the labor statistics, apart from the otherworldly unemployment rate, has been found in the figures for average weekly hours worked. It, however, hasn’t amounted to much more than a minor shift, more like everywhere else the absence of further deterioration than meaningful acceleration.
Unfortunately for Federal Reserve officials, the small change in hours accounts for the small acceleration in weekly earnings. Wage rates continue to refute the unemployment rate, and incomes overall are nowhere near what would be consistent with “full employment.” At only 2.7% (6-month average, year-over-year), growth in earned income has merely matched the 2014 upturn, remaining far less than is required for an end to this stagnation.
The reason for that is very simple. The media has become filled with anecdotes and stories about a labor shortage, but as is common sense it can only be one related to regular turnover rather than of expansion (rapid or otherwise). Companies are always seeking new employees if for no other reason than existing workers leave all the time. There is no shortage that cannot be cured by rising wages and pay.
