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Yammy:

“The greatest issue plaguing the U.S. economic recovery is the dismal pace of real income and wage growth. As long as incomes do not keep up with the underlying rate of inflation, the economy cannot manage enough growth to foster job creation. Average hourly earnings were unchanged in May, and only 2 percent higher than year ago levels. In other words, consumers are simply running in place. This is particularly frustrating for those at the lower end of the income spectrum.

According to the report, 96,300 of the 175,000 new nonfarm jobs created last month were in very low wage industries (retail, 27,000), temporary, (25,600), leisure and hospitality (43,000). The industries with the two lowest hourly wages are leisure and hospitality at $11.76 per hour and retail at $13.92 per hour. Even more concerning is that many of these positions are being filled by older, formerly retired persons who are taking away employment opportunities for young people. The unemployment rate for teenagers (16 to 19 years) increased to 24.5 percent in May from 24.1 percent in April.

This is not a social judgment; it’s economics. That middle income strata — the primary driver of the U.S. economy — has fallen to the low income, and the low income has plunged to poverty. Now it’s just the “haves” in the driving seat, and once the stock market gets hit, it will fall down a rung too.”

Not especially encouraging . . . Its something I would very much like to see improve . . .

 

 

Source:
Richard Yamarone
Bloomberg Briefs, June 10, 2013

Category: Data Analysis, Employment, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “May Employment Report Offers Little Cause for Celebration”

  1. willid3 says:

    not so sure that most consumers are running in place, a great deal of workers (aka 99% of consumers that drive job creation) didnt get any increase in wages at all. so standing in place while there is really low inflation is really not. its falling back instead

  2. Theravadin says:

    Since most of the jobs being created are low wage, time to think about a serious rise in minimum wage – say to $15/hour. The usual arguments against are:
    1) Loss of jobs, or inflation, as prices go up or profits are squeezed. However, given that low wage earners generally spend over 100% of their incomes (including gov’t programs and liquidation of personal assets), this money would be recycled into the economy so fast that many of the same business that would see their costs go up (ex. MacDonalds), would also see their sales go up, thereby creating jobs. And given that a little more inflation right now is probably desirable…
    2) Jobs being lost overseas to lower wage countries. An analysis of US labour statistics suggests that the vast majority of the jobs that would be effected (jobs with wages currently below $15/hr), are non-exportable – essentially, service or location specific employment. Essentially, pretty much any job that could be exported… already has.

    My analysis suggests that the net effect would likely be an increase in job creation and economic activity… and it would certainly make a lot of citizen’s lives better. I would suggest that every supply side economist who jibes at the idea immediately have their wage reduced to $12/hr,..

    • cowboyinthejungle says:

      It seems that “short-term-ism” has made the shareholder the only focus of private enterprise. When local and even regional businesses had more marketshare, there seemed to be a longer term vision, which allowed for the consideration of all stakeholders. i.e. Customers, employees, and shareholders were each valuable parties to be satiated. Businesses that did well found models that would balance the benefits to all 3 groups. No longer. Now, corporations are global. They need not worry about U.S. customers or workers…there are human resources to be exploited elsewhere. And besides, how else can they get next quarter’s profits up?

      It would also be interesting to see the decisions the bottom 20% make if min wage paid more than government benefits. Conservatives may be right that these 2 are out of balance, but insist that it is the safety net, not the living wage that is the variable to be adjusted. As you said, perhaps anyone with this opinion should live on $12/hr for a year.

  3. Fred says:

    We should not be surprised, Ross Perot called it “the sucking sound”. We exported the U. S. manufacturing base to gain lower labor rates and got cheap products to sell World wide. Now we have fewer entry level manufacturing jobs, greater low skill job unemployment, higher social service costs. We who are “well to do” gain a benefit in a lower cost on the foreign goods produced , our “standard of living” is better. But, the workers employed in the ” leisure and entertainment” categories cannot afford to buy the foreign goods and their status looks like poverty. Wellcome to the “World market place”.

  4. WallaWalla says:

    And, to add to the troubles of the 18-24 crowd, many are graduating college with substantial debt to find themselves in these low wage positions. Student loan debt has now eclipsed credit card debt(!) while the value of a college degree continues to deflate.

    I graduated from a small liberal arts college several years ago when the recession was still in full swing. About 1/4 of my peers found good/great paying salaries while the other 3/4 are just scrapping by after paying the bills. One friend told me she wouldn’t start a family until her student loans are paid off, let alone get a mortgage or buy a new car. Sure this is just anecdotal evidence, but it has a big economic impact when multiplied across the entire country.

    College gets more expensive requiring larger loans. Wages do not grow. College degree value deflates. New college graduates are not desirable because they do not come with years of work experience or highly specialized skill-sets….

    P.S. if I had a dime for every time I’ve seen an “entry-level” position advertised as requiring 2-4 years experience in that particular sector, I’d be able to pay off my student loans right now.

  5. Angryman1 says:

    The May employment report was pretty good. The internal US economy is doing pretty good, especially considering budget cuts.

    The problem is Europe, which may cause a capital goods bubble in the US with the massive amount of capital flight to the US since the winter of 2011. Then, domestic growth should outstrip Europe’s problems.

    Raising interest rates would help as well, but that would just boom the bubble out of control like the 04-5 interest rate hikes did. There is your real reason for Zirp.

  6. MikeNY says:

    It’s sad. But “trickle down” and “bigger bubble” seem to be the only tricks in the Fed’s book for economic growth.

    And sadder, the Fed is giving Congress (which could actually do something real) cover to do jack shit.

  7. Angryman1 says:

    It isn’t the FED, it is the global economic system itself. The constant “problems” lead toward excess capital flight into the US and those “build” the bubbles. There was no bubble in the 90′s.

    • MikeNY says:

      There was no bubble in the 90s? What was NASDAQ 4000, then 5000 — justified by fundamentals?

      Are you saying that the “risk-free rate” in the US dollar — the global reserve currency — has nothing to do with asset valuations, even in the US? If so, that is indeed a revolutionary insight, and I’d like to hear more.

  8. The Participation Rate is on a trajectory to decline from today’s 63.4% to 58.5% by 2050. It is unlikely real wage growth with occur ’til UR-3 approaches the Natural Unemployment Rate of 6% (in April 2015). To avoid inflation, this infers we’ll see first FOMC rate hike in Dec/2014.

    natural UR chart: http://trendlines.ca/free/economics/RealUnemploymentRateUSA/RealUnemploymentRateUSA.htm