News of the Weak (Labor Market)

A note on this morning’s report

Not so hot

This morning’s employment report was a downside surprise, so I thought I would post a quick note about what the data are telling us.

The surprise fall in employment — 23,000 jobs lost, when the consensus forecast was for around 80,000 gained — made headlines. As always, it’s important to realize that monthly jobs numbers are noisy, so you shouldn’t overreact to one report. However, this report also revised data for several earlier months down, so the broader picture of job growth in Trump’s “golden age” is significantly worse than it seemed.

Now, very low job growth — around 26,000 a month over the past year — doesn’t mean the same thing it would have a few years ago. Why? Because anti-immigrant policies have drastically slowed the growth of the pool of potential workers. We used to need more than 100,000 jobs a month to keep up with the growing work force and keep unemployment level. At this point we can have low job creation without a major rise in unemployment.

On the other hand, the fact that job growth has slowed so sharply puts the lie to claims that anti-immigration policies would free up jobs for the native-born. To a first approximation, U.S. losses of immigrant workers have been matched 1 for 1 by a fall in total employment relative to trend, with no improvement at all in native-born opportunities.

And several indicators suggest that the labor market has in fact weakened, although not as drastically as the employment number might suggest. Wage growth keeps falling, suggesting weak worker bargaining power:

And there’s a private-sector measure I find informative, the Conference Board’s “labor market differential” — the difference between the percentage of workers saying that jobs are “plentiful” and those saying that they are “hard to get.” This number is normally positive — we are a nation of optimists — but has fallen a lot, indicating that people actually out there in the labor market feel that it’s weak:

Source: Haver Analytics

Trump keeps insisting that the U.S. economy is “the hottest it has ever been.” But American workers aren’t feeling it — and neither are the hard data.