Let’s call the job and wage data somewhat contradictory. Perhaps nuanced is a better word. Understanding why the series has been that way goes a long way towards comprehending this odd economy, and forming an intelligent guess as to where it goes next.
To do this, we need assume the role of the two handed economist:
One the one hand, hiring was quite respectable in January: The economy created 193,000 nonfarm jobs, — 53,000 more than December. Revisions to the prior two months were plus 81,000. Factoring in the final revised data, the 3 month average has been 229,000/mo. (Not too shabby!).
Of course, the headline data continues to tell an incomplete story. The WSJ notes that "Construction payroll soared by 46,000, the 12th consecutive monthly
increase for the sector, spurred on by favorable weather conditions and
rebuilding projects in Gulf Coast areas devastated by Hurricane Katrina
last summer." That’s not organic, thats low interest rates stimulus and an act of nature at work.
Other Job gains were concentrated in low wage/low benefit positions. Bars and restaurants added 31,000, and health-care facilities (29,000).
Unreported by the media was a major modelling revision to the population and employment data. Perhaps this accounts for the unexpected drop in unemployment rate (tho the BLS notes otherwise).
Now, for the other hand. The NYT’s Floyd Norris notes the increasing disparity in wages between higher and lower paid employees:
"Over the last 20 years, for example, the real wages of blue-collar workers in the United States have risen only 1.1 percent, although total compensation was up 10 percent thanks to the rise in benefit costs. Service workers did a little better in wages, with a 1.4 percent increase, but over all had only a 9.1 percent increase in compensation over the two decades.
For white-collar workers, on the other hand, real wages increased over 20 years by 11.1 percent, while total compensation rose 18.1 percent. Within the white-collar group, executive pay rose 14.4 percent and total compensation was up 18.3 percent."
But its more than just pay: Its also benefits, heath care, pensions. Dan Gross calls this phenomenon "The Cram-Down Decade."
This disparity helps explain in part the general disconnect between ‘decent’ data, and the concern many have about their own economic situation. There is a sense of unease amongst the majority of the US population; Some have blamed the War in Iraq, while others blame the Katrina gas price spike. I believe it to be far more complex than that: What we have been experiencing is the "Nuanced Economy."
Why does this "disconnect" matter? At a certain point, that concern becomes acute, and manifests itself in a consumer slow down. We have seen only the earliest signs of this — Mortgage app slowdowns, modest holiday shopping season, decreased consumer credit.
And with Business Spending mostly AWOL — Q3 was a bright spot for Capex Spending — the econmy has become increasingly reliant on the Consumer.
Jobless Rate Falls To Lowest Level Since July 2001
THE WALL STREET JOURNAL, February 4, 2006
When It Comes to Pay, It Helps to Be the One Signing the Checks
NYT, February 4, 2006
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