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A Disappointing Job Performance

The economy produced just 75,000 jobs in May, according to the Labor Department. That was…

  • June 23, 2019

The economy produced just 75,000 jobs in May, according to the Labor Department. That was less than the 175,000 economists were expecting, and far less than last year’s monthly average of 223,000. To add insult to injury, totals for March and April were downward revised by a total of 75,000 as well.

After revisions, job gains have averaged 151,000 per month over the last 3 months. Economists like to see gains of at least 200,000 per month, on average.

The unemployment rate remained at 3.6 percent in May, and the number of unemployed persons was little changed at 5.9 million.

In May, 1.4 million persons were marginally attached to the labor force, little changed from a year earlier. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months.

They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 299,000 in May to 4.4 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

Over the past 12 months, the number of involuntary part-time workers has declined by 565,000.

Wage Growth Disappoints as Well

Hourly wages went up by a paltry 6 cents in May, on average. Over the past 12 months wages have barely kept pace with inflation, rising by just 3.1 percent. Factor in inflation and the net “real” wage gain was just 1.1 percent for the year.

What’s wrong with this picture? We have unemployment at a 50-year low yet wages are still rising at a sluggish rate. Normally, a tight job market produces impressive wage inflation, but this has yet to happen over more than nine years of economic expansion.

Part of the answer lies in the persistence of the “gig economy”. As mentioned earlier, there are still 4.4 million part time workers in the economy. That’s down from previous periods, but it’s still a significant number.

But perhaps the biggest single reason why wages aren’t shooting up despite “record low unemployment” is that the headline unemployment number is misleading.

In fact, millions of working age Americans have simply dropped out of the workforce. This is seen in the workforce participation rate which, despite those nine years of economic expansion and job growth, is quite low at 62.8 percent. In fact, it has dropped steadily from 65.7 percent in January of 2009. In August of 1999 it was 67 percent.