[08/05/16] The American jobs machine has moved back into high gear. After a long stretch of conflicting reports, the Labor Department said on Friday that the economy in July delivered a second consecutive month of robust hiring and rising wages in a signal that the expansion is strengthening, not ebbing, as it enters its eighth year.
Stocks surged, experts expressed more confidence that the Federal Reserve was likely to raise interest rates before the end of the year, and it was clear that long-stagnant wages for ordinary workers were advancing at a healthier pace.
“This was everything you could have asked for, maybe more,” said Michelle Meyer, head of United States economics at Bank of America Merrill Lynch. “We’re seeing new entrants into the labor market, which implies a longer runway for the business cycle.”
With the political conventions completed, the buoyant jobs numbers also have major implications for the presidential campaigns of Hillary Clinton and Donald J. Trump.
Not only does the new data undercut Republican arguments that the recovery is faltering, it also suggests that after years of paltry gains, deeply frustrated workers are finally seeing some benefits from the drop in unemployment, which was unchanged last month at a relatively low 4.9 percent.
Wages are up 2.6 percent over the last 12 months, a faster pace than earlier in the recovery, and many economists expect that the gain in incomes, adjusted for inflation, will accelerate later this year and into 2017.
“The idea that Republicans are touting, that the job market is a wreck, is clearly belied by the data,” said Jared Bernstein, an economist who served in the Obama administration. “What matters most to people isn’t G.D.P. growth, it’s jobs and wages.”
Longtime G.O.P. economic hands like Wayne Berman, a veteran of several Republican presidential campaigns, conceded Friday’s data was favorable for Democrats, but insisted it represented a snapshot of the economy, not necessarily the underlying trends. A major failing in the recovery, Republicans note, is that millions of Americans who dropped out of the work force during the recession have still not found jobs.
July’s jobs number “is a good statistic for Clinton to pivot towards,” said Mr. Berman, who currently serves as a top official at the Blackstone Group and advised Senator Marco Rubio of Florida during the Republican primary. He noted, however, that the economy grew at an annual rate of just 1 percent in the first half of 2016, a sharp decrease from last year.
“We’re in a very mixed economic picture now,” said Mr. Berman, recalling the presidential campaign of Senator Bob Dole two decades ago, when attacks on Bill Clinton’s economic record failed to resonate at a time of rising prosperity. “You can’t say this is like 1996, when there was no oxygen for Bob Dole’s arguments.”
The July increase in payrolls stands in sharp contrast to data released just last week showing disappointing economic growth in April, May and June.
A reason for the difference is that parts of the economy are still suffering from the continuing fallout from low oil prices as energy companies cut back on investment. Government spending also has been weak and many companies, at least for now, prefer to hire more workers rather than invest in new equipment and increase their efficiency and output.
If business and government investment continue to lag, that could undermine the long-term ability of the American economy to be more productive and raise living standards for most workers.
In late spring, the government reported that job creation in May was much weaker than economists had expected; a big rebound in June similarly caught the experts off guard. The July data helps clear up some of the confusion.
“This is a validator,” said Michael Gapen, chief United States economist at Barclays. “This is a report that indicates that the slowdown in hiring earlier in the year has been reversed.”
June’s gain was revised upward by 5,000 jobs, and May’s by 13,000. The combination of better gains in the spring and July’s increase in hiring means that the Federal Reserve is likely to have a more vigorous debate about raising interest rates when it meets in September. But most experts think the Fed will wait until December to be sure the economy remains on a solid track.
The Fed said in July, after the most recent meeting of its policy-making committee, that the economy was growing more strongly and there were fewer clouds on the horizon, suggesting it was giving greater consideration to rate increases later this year.
But on the policy-making front, William C. Dudley, the president of the Federal Reserve Bank of New York and an influential adviser to Janet L. Yellen, the Fed’s chairwoman, said on Sunday that current economic conditions still called for “caution in raising U.S. short-term interest rates.”
Job openings are spreading. “It’s been a really good summer for hiring all across the country,” said Tom Gimbel, chief executive of LaSalle Network, a recruiting and staffing firm based in Chicago. “Business has been great. Kids coming out of college are getting hired, and we’re seeing a lot of activity in the $50,000 to $150,000 category.”
The upswing in jobs last month also coincided with a sharp drop in unemployment among the least-educated workers, a group that has missed out on nearly all the gains of the current recovery thus far.
Other measures of the labor market suggest that underlying joblessness is higher than the official 4.9 percent rate, although nowhere near the 42 percent level Mr. Trump suggested last fall.
The broadest measure of unemployment calculated by the Labor Department, which includes workers who want full-time positions but cannot find them, stood at 9.7 percent in July.
To arrive at his figure, Mr. Trump apparently compared the total civilian population aged 16 and up — about 253.6 million people — with the 102 million Americans who are not in the labor force, according to Bureau of Labor Statistics data.
But in addition to the 7.7 million currently counted as unemployed, that larger figure includes more than 50 million Americans above the age of 55 who say they don’t want to work and are, for the most part, retired. It also takes into account 13.5 million Americans age 16 to 24, most of them in school, and millions of women who have chosen to stay home to care for their young children. None of those people are considered unemployed by the Labor Department.
The payroll figures, which reflect hiring at companies and in the public sector, revealed broad-based job gains, not just in lower-paid sectors like retail and leisure and hospitality, but in high-paying fields like professional and business services as well.
The household survey, which has offered a mixed picture in the past, was also robust.
The jobless rate for high school dropouts, which has been elevated throughout the recovery, fell more than a full percentage point to 6.3 percent, suggesting that employers who had previously ignored these lower-skilled workers are now taking a second look.
As the unemployment rate has fallen, some employers have raised salaries to retain their best workers and attract new ones. Increases in the minimum wage in many states recently, and increases in the lowest-tier salaries by big employers like Walmart, Target and Aetna, are also beginning to ripple through the broader work force.
But a two-tier job market remains in place, with workers in the same region facing radically different conditions depending on their level of education and skills.
In San Francisco, even the most junior software engineers hired at Sunverge, a maker of energy storage systems for solar electricity users, command starting salaries of just over $100,000.
A little more than 60 miles to the east, at Sunverge’s assembly plant in Stockton, Calif., where the unemployment rate is 9 percent, new blue-collar workers can expect to earn about $14 an hour, or $29,000 a year.
Sunverge is bulking up in both cities. But hiring technical talent is much more time-consuming, said Stu Statman, Sunverge’s chief of engineering.
“It doesn’t seem like it’s that hard to find good factory workers in Stockton,” Mr. Statman said. “In San Francisco, if you’re talking about software engineers or developers, it’s very hard. It takes a long time, and there’s a huge amount of hunger out there for people with these skills.”
Publisher: The New York Times
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Link: http://www.nytimes.com/2016/08/06/business/economy/jobs-report-unemployment-wages.html?_r=0
