The employment report was not “solid”, but had “toxic” elements

According to the BLS:

The Civilian Labor Force dropped by 469 thousand

The number of employed people dropped by 423 thousand

Those not in the labor force rose by 692 thousand

The unemployment rate stood pat at 3.9% because the Labor Force Participation & the Employment-Population Ratio dropped by the same amount, 0.2 percentage points (if only the LFPR had dropped, pundits would be “worried” by another drop in the unemployment rate).

It´s interesting to note that since early 2014, the “narrative” has changed. While in 2014-15 the average monthly increase in non-farm (NFP) employment was 237 thousand, we heard a lot about “best job market in decades”. That was not far from the 243 thousand average monthly gains seen during the height of the long 1990s expansion.

Then, the payroll downturn happened, with monthly gains averaging only 196 thousand since January 2017. No problem, the “narrative” switched to the falling and becoming dangerously low unemployment rate.

The charts illustrate.

Given the “too low” unemployment rate, the narrative is switching to, as someone put it “wage growth surged past estimates during a strong month for U.S. workers.”

As John Williams, at the time president of the San Francisco Fed, put it back in May/17:

“wage growth tends to trail behind improvements in the economy, and in the context of very poor productivity growth and low inflation, 2.5 per cent wage growth was consistent with a tightening jobs market. I would expect wage growth to get up to maybe 3.25 per cent once we are back to normal.”

The labor market has tightened further. However, note, by comparing the wage and inflation charts that over the past four-plus years, real wages haven´t budged!

In short, nothing is really improving.


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