Two Takes on New Employment Figures
Jared Bernstein says consumer demand continues to drive the labor market, but wage growth continues to lag behind overall growth:
One likely explanation is a first principle of labor economics: labor demand is derived demand, i.e., as long as employers, suppliers, health providers, etc. continue to see buyers, the job market will expand. In this regard, the seemingly tireless American consumer continues to play a key role in the expansion. Real consumption was up 4.2% in the last quarter of last year, and 3.2% over the last three quarters.
While the low unemployment rate signals a tight labor market, wage growth has not accelerated. In fact, the 4% year-over-year growth rate of hourly wages is slightly below recent months, and the lowest since October of last year. On a quarterly basis, hourly wages were up 4.1% since the first quarter of last year, and have been between 3.9% and 4.1% since 2006q2. Weekly earnings grew more quickly, up 4.4% over the year, due to the growth of weekly hours worked. But there is little in today’s report that should raise the threat of inflationary pressure from the job market. To the contrary, at this point in the six-year-old business cycle, robust job growth is a key source of income driving the economy forward.
Dean Baker says keep your eye on the productivity figures, which continue to look bad.