January employment report shows 304,000 increase in jobs. Rate rises to 4%. Wages flat.

This month we check in with the labor market economy.  The Evil Black Economist has stopped following the monthly unemployment release closely since about 2015 because US has fully recovered the number of lost jobs since the recession. Since then, little has changed in the labor market and the problems faced by the US are larger than the unemployment rate.

Non farm payroll increased by 304,000 jobs in January 2019 as reported on the business survey. The unemployment rate moved up slightly to 4.0%.  Average hourly earnings rose 3 cents (about 1/10 of one percent).

The long-term trends have not changed. Wage growth has split in two between the well educated professionals (with high wage growth) and everyone else (little wage growth). Inequality is growing.  Millennials cannot find good jobs and have huge student loan debt.  The top 10% has captured most of the GDP growth. Large corporations dominate the business world.

The recovery from the 2007 recession has provided incredibly stable growth. Stable growth provides a great chance to tackle difficult long term problem without worrying about recession. We have also learned the absolute amount of debt is not as important as the debt to GDP ratio. Deficit hawks were simply trying to make Obama look bad at the expense of the country.

These two trends: stable growth and "deficits don't matter as much" have given the country a great opportunity to improve it's social programs.

The big story: Wage Growth(or the lack of)

Why do the financial analysts and economists follow the wage growth number rather than the unemployment number?

Investors and the financial community are looking for signs of the next recession. They have bet real money on the economy.  Wage inflation could signal higher employer costs and lower profits, which might signal a slowdown.   The 2018 Christmas stock market crash revealed how jittery the market is. And no one wants to be the last investor to leave the stock market.

Economists are looking for the health of the labor market. Most economists are concerned about inequality, decent wages, and living standards.  So they track the most important determination of individual happiness: wages.

The unemployment rate has changed little since October 2015, when it dropped below 4.5%.  The US economy has grown for nine and half years and the number of new jobs created has exceeded those lost during the recession.

However, during the past 40 years, the pay and quality of jobs for the average American have deteriorated. Wages have grown slightly since 1980 on average, while the bottom 10% have lower wages during the same time period.

So most financial analysts and economist follow the wage number. Wage were up 3 cents (one tenth of one percent) which is basically zero. So both the stock market rally and economic anxiety will continue. 

Unemployment Report 

The unemployment report was stronger than usually with businesses reporting they added 304K workers. The unemployment rate rose to 4.0% because of an 241K jump in the number of people reported as unemployed. The participation rate was up 0.15% to 62.3%, a pretty big jump. Wages did not grow in the month (+0.1% or 3 cents).





Employment grew in the low wage industries of leisure and hospitality by 74,000 employees. Healthcare added 42,000 and Construction a huge 52,000. Transportation added 27K jobs and Retail Trade hired an additional 21,000 people.



Among the major ethnic groups in the US, the White unemployment rate was reported at 3.4%, the Black rate at 6.8%, the Hispanic rate at 4.9% and the Asian rate at 3.1 percent. The long term unemployed comprised 19.3% of the total unemployed and were counted at 1.3 million.



A Closer Look at the Black Unemployment Rate

The chart above shows the Black unemployment rate and the LFP rate. 

The Black unemployment rate rose to 6.8% from 6.6% in December. The Black participation rate increased to 62.8 in January as Black employment increase by 113,000. The unemployment rate for Black men, 20 and order, was 7.1% while Black women in the same age group were unemployed at a rate of 5.5%.  Black men participate in the labor market at a rate of 68% while the participation rate for Black women is 63%. Black teenage unemployment was calculated at 21%.

As is our tradition, we calculate the "real" Black unemployment rate which is 10.9% in January. Both the Black unemployment rate and the US U-6 rate increased during the period.   U-6 is the broadest measure of unemployment. U-6 is includes who wants to work and has looked for a job in the past 12 months plus part time people who want full time work.

Wages

Hourly wages for all employees increased by by $0.03 cent in January to $27.56.  Hourly wages are up about 2.5% (1.2% when adjusted for inflation) in the past year. Hourly wages for non-supervisory employees rose by 3 Cents. Over the past year wages have risen by 3.2%.

The average growth in wages has been below 1% after inflation between 2006 to 2019.

Job Openings and Labor Turnover Survey

Job openings, hires and quits have all rebound since the 2007 recession.  

November NFP jobs were revised up from 176K to 196K (+20K). December was revised downward from 312,000 to 222,000 (-90,000).

ADP reported 213,000 non farm private jobs were created.  The jobs were split among small businesses (+63K), medium sized businesses (+84K) and large businesses (+66K).  According to ADP goods producing business increased jobs by +68K while services hired 145K workers. 

Paychex small business jobs index was down at 98.92; It's down -1.0% for the year. Paychex also report that hourly wages grew 2.5% in the preceding 12 month period.