Seminar Series: Three Ways to Use WSJ in Your Course

Average Hourly Wages Exceed Consumer Price Index (Inflation)

An Introduction to Linear Regression Analysis

The latest on U.S. Gross Domestic Product

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The Heckscher-Ohlin Theorem

The Heckscher Ohlin model of International Trade

Notes on the U.S. Employment Situation for October 2019

OVERVIEW

• Total non-farm payroll employment increased by 128,000 and the unemployment rate remained at 3.6 percent, according to the Bureau of Labor Statistics.
• The Labor Force Participation (LFP) rate was little changed at 63.3 percent. The Employment-Population ratio also rose slightly to 61.0 percent and has increased 0.6 percent over the year. Both measures were up, according to the BLS, by 0.4 percentage point over the year.
• Food Services and Drinking Places emerged as the leading sector in October adding 48,000 jobs.
• Federal Government (-17,000) declined as a result of temporary workers completing their advance 2020 Census work.
• Financial Activities added 16,000 jobs with gains taking place in the real estate and rental and leasing sector (+10,000). Another sub-sector credit and intermediation saw a rise of 6,000 jobs.
• Based on the growth in individual and family services, the Social Assistance sector added 20,000 jobs.
• Employment in other industries also did not change from September to October: Mining, Construction, Wholesale Trade, Retail Trade, Information, Transportation and Warehousing.
• Health Care continues to add jobs (+15,000). Over the past year, the sector has added 402,000 jobs.
• Average hourly earnings rose by 6 cents to $28.18. Since October 2018 wages are up 3.0 percent.
• In October, the average workweek for all employees remained at 34.4 hours.
• The number of persons employed part-time changed little at 4.4 million. The number of long-termed unemployed (greater than 27 weeks) remained unchanged at 1.3 million and accounted for 21.5 percent of all unemployed.
• Revisions to the two previous months counted 95,000 more jobs than reported initially. August 2019 was revised up 51,000 from +168,000 to +219,000 and September 2019 was revised up 44,000 from +136,000 to +180,000.

ANALYSIS

Today’s payrolls report exceeded the low expectations. Wall Street expected as few as 85,000 jobs. 

No doubt driving those expectations were the General Motors strike. The BLS also noted that federal Census hiring stalled due to a lull in temporary workers. Specifically, Manufacturing decreased by 36,000 jobs in October. The “GM-effect” which pulled 42,000 jobs out of the motor vehicles and parts sub-sector only slightly shaded manufacturing as a whole.

The jobs number was impressive given the worries about manufacturing sentiment. The Institute for Supply Management said its manufacturing index wobbled up to 48.3% in October from a 10-year low of 47.8%. Still, the American jobs machine more than just muddles on. After revisions to the two previous months, a key indicator of momentum, job gains have averaged 176,000 over the last three months.

Both workers who are “marginally attached to the labor force” and “discouraged workers” are down from a year ago: 262,000 and 165,000 respectively. While the BLS reported that the Labor Force Participation rate remained unchanged, approximately 325,000 workers entered the workforce. 

Job growth is a pronounced topic in discussions about the strength of the U.S. economy and the good news often has analysts second-guessing predictions. “Over the past decade, the labor market has demonstrated surprising strength many times even as other measures of the economy cast a shadow of doubt. It’s doing so again,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

The BLS reported a gain of 129,000 private sector jobs nearly matching the ADP National Employment Report estimate of 125,000 jobs. 

Unemployment continues to decline across all educational attainment groups. The rate for workers with less than a high school diploma is now 4.8 percent— far lower than the pre-recession rate of 7.0 percent in January 2006 (See Figure 1). The college educated cohort current enjoys an unemployment rate of 2.0 percent. In the last 12-month period, the average unemployment rate is as follows: for those with less than a high school education (5.5 percent); high school graduates-no college (3.7 percent); Some college or associate’s degree (3.1 percent) and bachelor’s or higher (2.1 percent.)

IMF suggests a $75 per ton carbon tax. What would it mean?

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Does the Equilibrium Model Work?

• Chart: U.S. Poverty Levels Fall To Pre-Recession Low | Statista

• Chart: U.S. Poverty Levels Fall To Pre-Recession Low | Statista

What it will cost you to rent a one-bedroom apartment in Boston: Latest stats

The ideas of Harold Demsetz, 1930-2019 | VOX, CEPR Policy Portal

The ideas of Harold Demsetz, 1930-2019 | VOX, CEPR Policy Portal

The Progressive Feeding Frenzy – Reason.com

The Progressive Feeding Frenzy – Reason.com

From Robert Hughes over at the American Institute for Economic Research.

U.S. nonfarm payrolls added 130,000 jobs in August, below the consensus expectation of 158,000. The prior two months were revised down, showing gains of 159,000 and 178,000 for July and June, respectively. The three-month average from June to August was 156,000, well below the 199,000 average since 2011, but still a decent performance. Despite the slowdown in jobs growth, hourly earnings rose, the length of the workweek increased, the unemployment rate held steady and the participation rate rose. Overall, the report provides mixed signals.

Notes on the U.S. Employment Situation for August 2019: Unemployment Rate Remains at 3.7% while Payrolls Increase by 130,000

OVERVIEW

• Total non-farm payroll employment in August increased by 130,000 and the unemployment rate remained at 3.7 percent for the third consecutive month, according to the Bureau of Labor Statistics. 
• The Labor Force Participation (LFP) rate rose to 63.2 percent. The Employment-Population ratio also rose slightly to 60.9 percent and has increased 0.6 percent over the year.
• Professional and Business Services (+37,000) and Federal Government (+28,000) led all sectors in August. Health Care moved up (+24,000).
• Financial Activities added 15,000 jobs with half the gain taking place in the insurance carriers and related activities sub-sector.
• Construction also changed little over the month.
• Employment in other industries also did not change from July to August: Construction, Manufacturing, Transportation and Leisure and Hospitality changed little.
• Mining and Retail Trade lost jobs by 6,000 and 11,000, respectively.
• Average hourly earnings rose by 11 cents to $28.11. Since August 2018 wages are up 3.2 percent.
• In August, the average workweek for all employees increased to 34.4 hours. 
• The number of persons employed part-time was increased in August to 4.4 million from 4.0 million. The number of long-termed unemployed (greater than 27 weeks) remained unchanged at 1.2 million and accounted for 20.6 percent of all unemployed. 
• Revisions to the two previous months counted 20,000 less jobs than reported initially. June 2019 was revised down by 15,000 from +193,000 to +178,000 and July 2019 was revised down 5,000 from +164,000 to +159,000.

ANALYSIS

Today’s payrolls report failed to meet expectations and added fuel to speculation about an economic slowdown, if not a pending recession difficult to predict. Wall Street expected 165,000, the BLS printed 130,000.

Earlier this week, ADP estimated private jobs at 195,000, the BLS today said the private sector created 96,000 new jobs.

Once again, revisions to the previous two months dampened the job growth. Today’s three-month monthly average in payrolls trended down to 156,000 — far below the 2018 average of 223,000 jobs per month. The report looks worse if one examines the short-term hiring of census workers by the federal government (+25,000.) In August, 1.6 million persons were not in the workforce but wanted and were available for work and sought employment in the last year. This group is known as the “marginally attached to the labor force.” 

Retail trade has lost 80,000 jobs over the year. And, even the high-flying Professional and Business Services sector is slowing down. The monthly average of 34,000 in 2019 for this sector is below the average monthly gain of 47,000 in 2018.

However, the nation’s Labor Force Participation rate rose to 63.2 percent, an encouraging sign. The Employment-Population ratio is the highest since 2008. "Here we have interesting data, because the headline increase in payrolls is disappointing," wrote Jefferies’ Thomas Simons, minutes after the BLS release. "That being said, all of the peripheral data is really pretty good."

The good data shows up in the continuing increase in average hourly earnings. Private non-farm workers now earn $28.11 per hour, representing at 12-month gain of 3.2 percent. Economists were expecting a 3.0 year-over-year gain. The wages in the Information sector saw hourly rates increase 5.5 percent (to $42.37 per hour).

Those gains are still lagging the increases in worker productivity (see Figure 1). This “productivity gap,” which began in the 1970s, has stymied economists who grasp for various solutions such as restoring workers’ bargaining power through unionization. These strategies may be like pushing a string as technology, namely automation is aggravating the decline in labor’s share.

Figure A: The Productivity Gap: Earnings Lag Gains

Confidence takes a slight fall

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U.S. GDP slows down...

source: tradingeconomics.com

Statement of Eric S. Rosengren, Commenting on Dissenting Vote at the Meeting of the Federal Open Market Committee - Federal Reserve Bank of Boston

Statement of Eric S. Rosengren, Commenting on Dissenting Vote at the Meeting of the Federal Open Market Committee - Federal Reserve Bank of Boston

Notes on the Massachusetts Employment Situation for June 2019: U-Rate: 3.0 %; Jobs: +9,800

OVERVIEW

• The state’s total unemployment rate for May remained at 3.0 percent according to the Executive Office of Labor and Workforce Development.  The Commonwealth reports that 9,800 jobs were added in June.  
• From June 2018 to June 2019, the Bureau of Labor Statistics estimates that Massachusetts added 35,500 jobs.  However, the Labor Force Participation rate declined one-tenth of a percentage point to 67.7.
• Over the month, the private sector added 8,400 jobs as gains occurred in Education and Health Services; Leisure and Hospitality; Financial Activities; Manufacturing; Information and Trade, Transportation and Utilities.  
• Professional, Scientific and Business Services added 1,000 jobs with 7,100 jobs added over the past 12 months. 
• After losing 300 jobs in May, the Education and Health Services sector added 5,100 jobs Over the year, this sector gained 21,500 jobs.
• Manufacturing gained 300 jobs in June but has lost 1,600 jobs over the year. 
• The Construction sector lost 900 jobs and has lost 3,400 over the year. 
• Trade, Transportation and Utilities added 100 jobs Over the year, the sector lost 800 jobs.
• Financial Activities gained 1,300 jobs while Information added 200 jobs in June; year over year, the sectors gained 1,300 and 1,700 jobs, respectively. 
• Government added 1,400 jobs in June. Over the past 12 months this sector has gained 4,200 jobs.
• The 3.0 percent rate in Massachusetts is seven-tenths of a point lower than the national rate of 3.7 percent.
• According to the BLS, Vermont enjoyed the lowest unemployment rate in the nation. (See Table A.)

ANALYSIS

Following a loss of jobs in May, Massachusetts bounced back with the addition of 9,800 jobs in June. 

"BLS estimates there are now 3,682,400 jobs in the Commonwealth, Labor and Workforce Development Secretary Rosalin Acosta said. "Job gains both over the month and over the year continue to be led by the Education and Health services sector which added 21,500 jobs and has grown by 2.7 percent over the last year."  

The figures for other sectors, however, are not so rosy. 

Over the past year the Retail, Mining and Construction, Manufacturing, Trade Transportation and Utilities and Whole Trade combined lost 10,700 jobs. 

But Education and Health Services doubled that amount for the year. Other sectors such as Leisure and Hospitality and Professional, Scientific and Business Services also contributed to strong private sector job growth.  

The combined federal, state and local government gained 4,200 jobs over the year (although state government lost 900 jobs during that period). Government employment in Massachusetts has been remarkably stable even through the Great Recession (See Chart A). 

Meanwhile,wages in the sector are rising with state government weekly wages nearly matching overall average for all workers (See Chart B). 

Pay for federal work is also growing. In January 2006 a federal worker in the Bay State earned $1,224; in December 2018 he an earned $1,712 average wage. During the same period, the average weekly wage for Massachusetts worker rang in at $1,046 and rose to $1,457 by the end of 2018. 

Chart A:  Government Employment in Massachusetts: Federal, State & Local 2006-2019

Chart B:  Government Wages in Massachusetts: Federal, State & Local 2006-2019

Press Release: LWD: Massachusetts U-Rate for June 2019: 3.0%, Payrolls +9,800

Massachusetts Unemployment and Job Estimates for June

(BOSTON, MA -JULY 19, 2019) - The state's June total unemployment rate remained unchanged at 3.0 percent, the Executive Office of Labor and Workforce Development announced Friday. The Bureau of Labor Statistics' preliminary job estimates indicate Massachusetts added 9,800 jobs in June. Over the month, the private sector added 8,400 jobs as gains occurred in Education and Health Services; Leisure and Hospitality; Financial Activities; Manufacturing; Information and Trade, Transportation and Utilities. Government added jobs over the month. From June 2018 to June 2019, BLS estimates Massachusetts added 35,500 jobs. The June unemployment rate was seven-tenths of a percentage point lower than the national rate of 3.7 percent reported by the Bureau of Labor Statistics. "BLS estimates there are now 3,682,400 jobs in the Commonwealth, which is 287,100 jobs above the previous Massachusetts cumulative job count high from February of 2001,” Labor and Workforce Development Secretary Rosalin Acosta said. “Job gains both over the month and over the year continue to be led by the Education and Health services sector which has added 21,500 jobs and grown by 2.7 percent over the last year.” The labor force decreased by 2,100 from 3,840,900 in May, as 1,700 fewer residents were employed and 500 fewer residents were unemployed over the month. Over the year, the state's seasonally adjusted unemployment rate dropped four-tenths of a percentage point. The state's labor force participation rate - the total number of residents 16 or older who worked or were unemployed and actively sought work in the last four weeks - dropped one-tenth of a percentage point at 67.7 percent over the month. Compared to June 2018, the labor force participation rate is unchanged. The largest private sector percentage job gains over the year were in Education and Health Services; Information; Leisure and Hospitality; and Other Services. June 2019 Employment Overview Education and Health Services added 5,100 (+0.6%) jobs over the month. Over the year, Education and Health Services gained 21,500 (+2.7%) jobs. Leisure and Hospitality gained 3,100 (+0.8%) jobs over the month. Over the year, Leisure and Hospitality added 5,700 (+1.5) jobs. Financial Activities gained 1,300 (+0.6%) jobs over the month. Over the year, Financial Activities added 1,300 (+0.6%) jobs. Manufacturing gained 300 (+0.1%) jobs over the month. Over the year, Manufacturing lost 1,600 (-0.7%) jobs. Information added 200 (+0.2%) jobs over the month. Over the year, Information gained 1,700 (+1.9%) jobs. Trade, Transportation and Utilities added 100 (0.0%) jobs over the month. Over the year, Trade, Transportation and Utilities lost 800 (-0.1%) jobs. Construction lost 900 (-0.6%) jobs over the month. Over the year, Construction has lost 3,400 (-2.1%) jobs. Professional, Scientific and Business Services lost 400 (-0.1%) jobs over the month. Over the year, Professional, Scientific and Business Services gained 4,900 (+0.8%) jobs. Other Services lost 400 (-0.3%) jobs over the month. Over the year, Other Services are up 2,000 (+1.4%) jobs. Government added 1,400 (+0.3%) jobs over the month. Over the year, Government gained 4,200 (+0.9%) jobs. Labor Force Overview The June estimates show 3,725,300 Massachusetts residents were employed and 113,500 were unemployed, for a total labor force of 3,838,800. The unemployment rate remained at 3.0 percent. The June labor force decreased by 2,100 as 1,700 fewer residents were employed and 500 fewer residents were unemployed over the month. The labor force participation rate, the share of working age population employed and unemployed, dropped one-tenth of a percentage point at 67.7 percent. The labor force was up 30,900 from the 3,807,900 June 2018 estimate, with 47,500 more residents employed and 16,600 fewer residents unemployed. The unemployment rate is based on a monthly sample of households. The job estimates are derived from a monthly sample survey of employers. As a result, the two statistics may exhibit different monthly trends. NOTES: The labor force is the sum of the numbers of employed residents and those unemployed, that is residents not working but actively seeking work in the last four weeks. Estimates may not add up to the total labor force due to rounding. Local area unemployment statistics for June 2019 will be released on Tuesday, July 23, 2019. The preliminary July 2019 and revised June 2019 unemployment rate, labor force and job estimates for Massachusetts will be released on Friday, August 16, 2019. See the 2019 Media Advisory annual schedule for a complete list of release dates. Detailed labor market information is available at www.mass.gov/lmi. Source: Charles Pearce  617-626-7121 Charles.Pearce@massmail.state.ma.us Follow us on Twitter @MassLWD

Highly Recommended: "Commanding Nature by Obeying Her; A Review Essay on Joel Mokyr's Culture of Growth"

From NBER Working Paper 26061: Enrico Spolaore: Commanding Nature by Obeying Her; A Review Essay on Joel Mokyr's Culture of Growth

Abstract:

Why is modern society capable of cumulative innovation? In A Culture of Growth: The Origins of the Modern Economy, Joel Mokyr persuasively argues that sustained technological progress stemmed from a change in cultural beliefs. The change occurred gradually during the seventeenth and eighteenth century and was fostered by an intellectual elite that formed a transnational community and adopted new attitudes toward the creation and diffusion of knowledge, setting the foundation for the ethos of modern science. The book is a significant contribution to the growing literature that links culture and economics. This review discusses Mokyr’s historical analysis in relation to the following questions: What is culture and how should we use it in economics? How can culture explain modern economic growth? Will the culture of growth that caused modern prosperity persist in the future?

This essay is highly recommended. Link here. 

New NBER Working Paper: Improving the accuracy of economic measurement with multiple data sources: The case of payroll employment data

A new NBER Working Paper, "Improving the accuracy of economic measurement with multiple data sources: The case of payroll employment data," by Cajner, Crane, Decker, Hamins-Puertolas, and Kurz.

Abstract:

This paper combines information from two sources of U.S. private payroll employment to increase the accuracy of real-time measurement of the labor market. The sources are the Current Employment Statistics (CES) from BLS and microdata from the payroll processing firm ADP. We briefly describe the ADP-derived data series, compare it to the BLS data, and describe an exercise that benchmarks the data series to an employment census. The CES and the ADP employment data are each derived from roughly equal-sized samples. We argue that combining CES and ADP data series reduces the measurement error inherent in both data sources. In particular, we infer “true” unobserved payroll employment growth using a state-space model and find that the optimal predictor of the unobserved state puts approximately equal weight on theCES and ADP-derived series. Moreover, the estimated state contains information about future readings of payroll employment.

Available at NBER. 

Notes on the U.S. Employment Situation for June 2019: U-rate 3.7%, Jobs +224,000

OVERVIEW

• Total non-farm payroll employment increased by 224,000 and the unemployment rate rose to 3.7 percent, according to the Bureau of Labor Statistics.  
• The Labor Force Participation (LFP) rate remained at 62.9 percent the same rate from one year ago. The Employment-Population ratio also remained at 60.6 percent. 
• Professional and Business Services (+51,000) and Health Care (+35,000) led all sectors in May.  Construction added 21,000 jobs. Manufacturing added 17,000 jobs.
• Employment in other industries did not change from May to June. Mining, Wholesale Trade, Retail Trade, Information, Financial Activities, Leisure and Hospitality and Government changed little. 
• Average hourly earnings rose by 6 cents to $27.90. Since June 2018 wages are up 3.1 percent. 
• In June, the average workweek for all employees remained at 34.4 hours.  
• The number of persons employed part-time was unchanged in June (4.3 million). The number of long-termed unemployed (greater than 27 weeks) remained unchanged at 1.4 million and accounted for 23.7 percent of all unemployed. 
• In June 1.6 million persons were not in the workforce but wanted and were available for work and sought employment in the last year. This group known as “workers marginally attached to the labor force” was unchanged since last year. BLS reports that 1.1 million of this group had not searched for work “for reasons such as school attendance or family responsibilities.” 
• Revisions to the two previous months counted 11,000 less jobs than reported initially. April 2019 was revised from 224,000 to 216,000 while May 2019 was revised from 75,000 to 72,000. 

ANALYSIS

After a weak May payrolls report (+72,000) the U.S. jobs machine roared back with 224,000 new jobs in June. 

Professional and Business Services, Health Care and Transportation and Warehousing sectors lead June’s growth. 

Overall, the jobs machine is clearly slowing down. Employment growth, according to the BLS, has averaged 172,000 this calendar year compared with an average of 223,000 in 2018. 

However, today’s BLS report shattered expectations;  Wall Street expected a gain of 160,000 new jobs. While slower than one year ago, the private sector culled 191,000 new jobs. The parallel measure, the ADP National Employment Report, earlier this week projected a gain of 106,000 private jobs.  

With the BLS revisions, the three-month average for U.S. job growth rang in at 171,000. 

Despite uncertainty about international trade, the U.S. Manufacturing sector is holding its own. The Manufacturing sector added 17,000 jobs in June; while little changed over the past four months, manufacturing is growing albeit slowly. Thus far the sector has averaged 8,000 per month, compared with 22,000 last year. 

The trade-tariff impasse is not diminishing growth in the sector. While the manufacturing sector employs approximately 120,000 less workers than it did before the Great Recession, average hourly wages are rising steadily. (See Figure A.)  

Unemployment in the manufacturing sector declined from June 2018 to June 2019, from 3.1 percent to 2.8 percent. For most part, manufacturing attracts workers on the lower end of educational attainment, but wages are good entry point to the middle class. These workers have also fared well overall in the economy. Unemployment for those with less than a high school degree was 5.8 percent in May. Workers with a high school diploma and no college and some college faced unemployment rates of 3.9 percent and 3.0 percent, respectively. 

Figure A:  Employment and Average Hourly Wages in the U.S. Manufacturing Sector

Notes on the May 2019 Massachusetts Employment Situation: U-Rate: 3.0 %; Jobs: -3,600

OVERVIEW

• The state’s total unemployment rate for May increased to 3.0 percent according to the Executive Office of Labor and Workforce Development.  
• From May 2018 to May 2019, the Bureau of Labor Statistics estimates that Massachusetts added 26,700 jobs.  
• Professional, Scientific and Business Services added 1,000 jobs with 7,100 jobs added over the past 12 months. 
• Education and Health Services lost 300 jobs over the month. Over the year, this sector gained 14,300 jobs
• Manufacturing gained 100 jobs in May and has lost 1,800 jobs over the year. 
• The Construction sector lost 2,300 jobs and has lost 700 over the year. 
• Trade, Transportation and Utilities lost 2,300 jobs over the month. Over the year, the sector lost 600 jobs.
• Financial Activities lost 100 while Information added 300 jobs in May. 
• Growth in the Other Services sector remained unchanged but is up 2,300 over the year. 
• Government added 400 jobs in May. Over the past 12 months this sector has gained 4,900 jobs.
• The 3.0 percent rate in Massachusetts is six-tenths of a point lower than the national rate of 3.6 percent.
• According to the Bureau of Labor Statistics, unemployment rates were lower in 6 states, higher in 2 states, and stable in 42 states and the District of Columbia in May. Nonfarm payroll employment increased in Washington state and was essentially unchanged in 49 states and in D.C. 

ANALYSIS

Until last month, December 2016 was the last time the unemployment rate in Massachusetts ticked up by one-tenth of a point. In May 2019, the state’s rate ticked up to 3.0 percent.  The state’s economy is still at full employment.  

“Massachusetts continues to experience a strong economy with a low unemployment rate of 3.0 percent and over 60,000 more employed residents and 17,500 fewer unemployed residents in the last year. Also, the Commonwealth’s labor force participation rate remains at a near 15-year high and is 5 points above the US rate,” Labor and Workforce Development Secretary Rosalin Acosta said.  

The state’s labor force totals 3.84 million representing a 67.8 percent labor force participation rate. 

Manufacturing gained 100 jobs over the month, but the sector is still losing jobs since last year (1,800). Trade, Transportation and Utilities lost 2,300 jobs and Education and Health Services lost 300 jobs. However, Government added 400 jobs, part of the 4,200 jobs it gained year over year. 

Since the end of the Great Recession in June 2009, the state’s unemployment rate has dropped significantly from 8.1 percent. During the recovery, the Massachusetts unemployment rate increased by no more than 0.1 percent six times. That means the rate has dropped or remained unchanged for 109 of the 120 months that mark the recession (see Chart A). 

Chart A.

Massachusetts enjoys the 12th best unemployment rate in the U.S. (See Table A.) Two other New England states are atop the nation: Vermont has the lowest unemployment rate at 2.1 percent while New Hampshire registers third in the nation with its 2.4 percent rate.  

Table A: New England Unemployment Rates

Source: Bureau of Labor Statistics

The BLS updated the state’s county employment picture with April 2019 data.  Middlesex and Hampshire counties enjoyed the lowest unemployment rates. More than half of the counties — 8 of 14— recorded rates lower than the statewide rate of 3.0 percent for April 2019 (See Table B).

Table B: County Unemployment Rates

Democrats Would Resolve the Question of Whether Illegal Immigrants Burden Society

Merrill Matthews: Democrats Would Resolve the Question of Whether Illegal Immigrants Burden Society

Like most economists, we think legal immigrants can be a huge benefit to the economy—because historically most immigrants, whether legal or otherwise, came here to work.

Explainer: What makes up the Gross Domestic Product?

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Bloomberg's David Wilson: U.S. Stock Success Without Profit Brings Doubt at Oaktree

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Notes on the May 2019 U.S. Employment Situation: Unemployment Rate - 3.6%, Payrolls +75,000

Construction workers at a housing site in East Boston. Copyright EastBoston.com

OVERVIEW

• Total non-farm payroll employment increased by 75,000 and the unemployment rate remained at 3.6 percent, according to the Bureau of Labor Statistics.
• The Labor Force Participation (LFP) rate remained at 62.8 percent the same rate from one year ago. The Employment-Population ratio also remained at 60.6 percent.
• Professional and Business Services (+33,000) and Health Care (+16,000) led all sectors in May.  Construction added 4,000 jobs.
• Employment in other industries did not change from April to May. Mining, Manufacturing, Wholesale Trade, Retail Trade, Transportation and Warehousing, Information, Financial Activities, Leisure and Hospitality and Government were all unchanged.
• Average hourly earnings rose by 6 cents to $27.83. In May, the average workweek for all employees remained at 34.4 hours down from the May 2018 reading of 34.5. Since May 2018 wages are up 3.1 percent. (See Figure 1.)
• The number of persons employed part-time declined by 299,000 in May to 4.4 million. The number of long-termed unemployed (greater than 27 weeks) remained unchanged at 1.3 million and continued to account for 22.4 percent of all unemployed.
• In May 1.4 million persons were not in the workforce but wanted and were available for work and sought employment in the last year. This group known as “workers marginally attached to the labor force” was unchanged since last year. BLS reports that 1.1 million of this group had not searched for work “for reasons such as school attendance or family responsibilities.”

ANALYSIS

Lagging much below the three-month average of 151,000 jobs, today’s payrolls report of 75,000 new jobs is a disappointment. Both standard measures of private sector job growth, the BLS survey and the ADP National Employment Report captured the trend downward lackluster job creation for May. The BLS reported 90,000 private jobs while ADP on Wednesday reported 27,000 jobs.

While the BLS reported little or no changes for the mining and manufacturing sectors, the ADP found losses in both. The ADP report (-36,000) varied from the BLS (+4,000) on the construction sector.

As for the total Non-farm labor report, Wall Street expected of 175,000 new jobs. Revisions were also on the downside. March was revised down from 189,000 to 153,000 and April was revised down from 263,000 to 224,000 accounting for 75,000 less jobs than initially reported. The revision brought down the three-month average to 151,000 per month.  

What caused the job creation slowdown? Observers rest their arguments on the trade/tariff uncertainty dominating the news cycle. “It definitely looks like we’ve downshifted in the pace of job growth,” Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. told Bloomberg. “Overall it’s a disheartening report particularly since you may have some trade effects there, but a lot of the trade tensions escalated” since the reference period for the Labor Department’s surveys in the middle of the month.” Today’s report lends a dose of pessimism to the generally positive economic record of the last few years. Mike Fratantoni, chief economist for the Mortgage Bankers Association, told Yahoo Finance. “The job market remains tight, but this report, coupled with other recent data, shows a distinct cooling of the economy this spring.”

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Not Many See Full Employment in U.S. Economy: Conference Update

From Bloomberg

Central bankers are already making waves at what may well be the monetary-policy event of the year in the U.S.

Federal Reserve officials and leading academics are gathered in Chicago Tuesday and Wednesday to debate whether policy makers need to overhaul their strategies, tools and communication for managing inflation and preparing for the next economic downturn. 

Federal Reserve Chair Jerome Powell kicked off the conference Tuesday with a few words on the global trade tensions that are rattling financial markets and leading investors to believe the Fed will cut rates soon.

Google claims: 100 percent renewable energy, for the second year in a row

From Google's blog 100 percent renewable energy, for the second year in a row

In 2017, we first reached our longstanding goal of buying enough renewable energy to match 100 percent of Google’s global annual electricity use. And we’re on a roll: during 2018, our purchases of energy from sources like solar and wind once again matched our entire annual electricity consumption. 

We’re the first organization of our size to achieve 100 percent renewable energy two years running, but just as important as reaching our goal is how we did it. Addressing climate change will require adding renewable energy wherever possible and, for us as a company, making decisions that have an impact beyond our walls. We’ve asked ourselves: how can we use our purchasing to do the most good in the broader energy system?

Our first priority is to use as little energy as possible, operating our offices and facilities sustain-ably, with a strong focus on our data centers.

‘Lost Decade’ Casts a Post-Recession Shadow on State Finances | The Pew Charitable Trusts

‘Lost Decade’ Casts a Post-Recession Shadow on State Finances | The Pew Charitable Trusts

Statista: Where U.S. home prices are rising the fastest (and slowest)

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How Far Does $100K Stretch In Boston? You'll Be Sorry You Asked | Patch

Patch: How Far Does $100K Stretch In Boston? You'll Be Sorry You Asked

Here's what the authors had to say:

"Massachusetts has a reputation as a high-tax state, but a whole host of high costs lands Boston in the bottom 10 when it comes to take-home pay on a $100,000 salary. City residents suffer from high rent and grocery costs as well, along with the second-highest healthcare expenses of any city.

• Federal income taxes: $17,262.50
• Net pay after income taxes: $74,197.70
• Annual rent: $32,496
• Annual groceries: $5,245
• Annual utilities: $1,874.64
• Annual driving costs: $8,037
• Annual healthcare: $9,234
• Income leftover: $17,311

Read more here. 

Outwitting Walmart: FEE on Aldi phenomenon

Mark Perry: "I love Aldi and so do a lot of other consumers."

Notes on the April 2019 Employment Situation in Massachusetts: Unemployment Rate 2.9%, Payrolls +4,100.

OVERVIEW

• The state’s total unemployment rate for April dropped to 2.9 percent according to the Executive Office of Labor and Workforce Development.  Over the year, the state’s unemployment rate dropped six-tenths of a percentage point.  
• From April 2018 to April 2019, the Bureau of Labor Statistics estimates that Massachusetts added 37,100 jobs. After adding 4,000 private sector jobs, the state netted 4,100 total new jobs. 
• Professional, Scientific and Business Services added 2,300 jobs with 11,100 jobs added over the past 12 months. 
• Education and Health Services added 1,600 jobs over the month. Over the year, this sector gained 12,900 jobs
• Manufacturing lost 500 jobs in April and has lost 1,200 jobs over the year. 
• The Construction sector added 2,400 jobs and has added 2,700 over the year. 
• Trade, Transportation and Utilities lost 3,500 jobs over the month. Over the year, the sector added 2,200 jobs.
• Financial Activities, Information and Other Services added 400, 300 and 200 jobs, respectively. All three sectors are up over the past 12 months: FA-200, I-1,700 and OS-200.
• Government added 100 jobs in April. However, over the past 12 months this sector has gained 4,900 jobs.
• The 2.9 percent rate in Massachusetts is seven-tenths of a point lower than the national rate of 3.6 percent.
• According to the Bureau of Labor Statistics, eight states had lower unemployment rates in April, two of which were from New England: Vermont and New Hampshire. 

Table A: Historic Low Unemployment Rates in MA since 1977 

Source: https://www.bls.gov/web/laus/ststdsadata.txt

ANALYSIS

Outperforming most other states, the Massachusetts jobs creation machine continues to generate jobs— pushing the unemployment rate lower.  April’s rate matches similar ones last seen during the advent of the dotcom bubble (See Table A). 

“Year to date the Commonwealth’s economy has added 25,400 jobs showing that even with a low 2.9 percent unemployment rate, Massachusetts employers continue to add jobs to help fuel their growth needs,” Labor and Workforce Development Secretary Rosalin Acosta said today. 

This month Professional, Scientific and Business Services are up 1.9 percent over last year while Manufacturing lost 0.5 percent of its jobs. 

Year over year, the sub-sectors driving Professional Scientific and Business Services were Management of Companies and Technical Services which grew 4.1 percent and 2.4 percent respectively.  

The Arts, Entertainment, and Recreation sub-sector drove Leisure and Hospitality over the past year with 7.8 percent growth. The Bay State’s Labor Force Participation (LFP) rate slid slightly in April to 67.8 percent. The national LFP rate currently is 62.8 percent.  The state labor force decreased by 3,200 workers in April; it now stands mostly unchanged at 3.84 million. There are 112,200 workers considered unemployed in Massachusetts. 

February 2000 was the last month in which the state’s unemployment rate dropped to 2.9 percent with an LFP rate of 67.9 (See Table A).  

The rate is still shy of the record lows according to records going back to 1977. from May 2000 to October 2000, the Bay State registered six straight months of a 2.6 percent unemployment rate. (See Figure A). 

Since 1977, unemployment in Massachusetts has only significantly exceeded the national rate during three periods:  during 1977-1978 (for 18 months) 1990-1993 (38 months) and 2006-2007 (16 months). 

Figure A: Comparing U.S. and Massachusetts Unemployment Rates 

1977-2019

Federal Reserve Bank of St. Louis; FRED. 

Scott Sumner: The Myth of Stagnant US Wages: Fed Data Show the Story Was All Wrong

After the 2016 election, several pundits suggested that the Trump victory reflected frustration with stagnant real wages. Unfortunately, this argument is based on a misconception. The average hourly earnings series at the FRED (Federal Reserve Economic Data) data site only goes back 12 years, but real wages were doing well before the 2016 election:



By the way, in nominal terms, average hourly earnings are currently $27.77/hour. FRED does have a much longer series for average wages earned by production and nonsupervisory employees (which currently stands at $23.31):

I could not find median hourly wages, but they did have data on median weekly wages (currently $905):

There was a period of stagnant real wages, but it ended in the mid-1990s. All of these series show significant growth in real wages since the mid-1990s. Whatever explains the rise of populism in America, it is not stagnant wages. By the way, these time series understate the growth in total labor compensation, as the cost of fringe benefits such as health care has risen faster than nominal wage growth. 

Alternatively, if you believe that health benefits are nearly worthless (my view), then the nominal wage series should be deflated by a price index that excludes health care. That would show even more rapid growth in real wages.

PS. There is one downside to writing a post and then delaying the publication. Today’s Bloomberg has an article that makes many of the same points, and in some cases more effectively. But it doesn’t have my graphs.

This article was republished with permission from The Library of Economics and Liberty.

Scott Sumner

Scott B. Sumner is the director of the Program on Monetary Policy at the Mercatus Center and a professor at Bentley University. He blogs at the Money Illusion and Econlog.

This article was originally published on FEE.org. Read the original article.

Note on the April 2019 U.S. Employment Situation: U-Rate 3.6%; Jobs +263,000

OVERVIEW

• Total non-farm payroll employment increased by 263,000 and the unemployment rate declined to 3.6 percent, moving down 0.2 percentage point from the previous month according to the Bureau of Labor Statistics.  
• The Labor Force Participation (LFP) rate declined by 0.2 percentage point to 62.8 percent. Nonetheless, the rate was unchanged from a year ago. The Employment-Population ratio also remained at 60.6 percent. Since October 2018, the rate has been either 60.6 percent or 60.7 percent. 
• Professional and Business Services (+76,000) and Construction (+33,000) led all sectors in the April payrolls. Employment in Health Care (+27,000) did not finish in the top two sectors for growth but along with Professional Services (+535,000) added the most jobs over the past year with Health Care adding +404,000 jobs.
• With gains in nonresidential specialty trade contractors and in heavy and civil engineering, Construction has added 33,000 jobs. For the year, the sector has added 22,000 jobs. 
• Manufacturing sector employment (+4,000) changed little for the third month in a row. In the 12 months prior to February 2019 the industry added on average 22,000 jobs per month. 
• Average hourly earnings rose by 6 cents to $27.77. In April, average workweek for all employees decreased by 0.1 hour to 34.4 hours matching the rate for February 2019.  
• The number of persons employed part-time held was unchanged at 4.7 million in April. The number of long-termed unemployed (greater than 27 weeks) remained unchanged at 1.2 million and remained to account for 21.1 percent of all unemployed. 
• The following sectors saw little or no change in employment:  Mining, Wholesale Trade, Transportation and Warehousing, Information, Leisure and Hospitality, and Government.

ANALYSIS

This month’s report is a rebounding blockbuster, considering two months ago the U.S. stock market and policy makers were stunned by the creation of only 56,000 jobs. (The original number was 33,000).  

Wall Street estimated the April payrolls number at 185,000 jobs.  Earlier in the week, the ADP National Employment Report,  estimated the creation of 275,000 new private sector jobs; the BLS reported private sector job creation at 236,000 jobs. 

Retail trade changed little in April; the sector was down 12,000 jobs but the motor vehicle and parts dealers subsector added 8,000 jobs. General merchandise stores suffered a loss of 9,000 jobs. 

Revisions to previous reports were mixed. The February payrolls number was revised upward to 56,000 from 33,000 and the March number was revised down from 196,000 to 189,000. Still the revisions identified 16,000 more jobs than previously reported.  The three-month moving average settled at 169,000 per month. Similar revisions from the earlier three months resulted in a three-month average of 180,000. 

The unemployment rate of 3.6 percent is the lowest since 1969. 

The current economy, based on supply-side reforms, is benefiting workers and instilling confidence in consumers. Not so long ago, market watchers were worried about the slowdown in consumer spending as a bellwether of an almost certain downturn. 

On Thursday, the BLS reported than nonfarm business sector labor productivity increased 3.6 percent in the first quarter of 2019, with output increasing by 4.1 percent and hours worked increased 0.5 percent. Along with productivity (another blow-out number), the job market is at a sweet spot. 

Today’s report noted that average hourly earnings over the past year have increased by 3.2 percent.  Workers and consumers are more careful about how they treat homeowner equity which is 16 percent higher than 2006, the advent of the Great Recession. Apparently increased wages serve as a bulwark against reckless home equity borrowing. 

As a result, workers are saving more. The article to read is “Why Are Americans Suddenly Saving?” by Matthew C. Klein in Barron’s on April 22, 2019.

Source: Author’s calculations based on BLS and US Census historical data (Total Retail Sales)


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