Posts Tagged ‘unemployment’

fredgraph

U.S. workers’ wages are going nowhere fast.

According to the latest report from the Bureau of Labor Statistics, the average hourly pay of production and nonsupervisory employees on private nonfarm payrolls was $20.80 in February was exactly what it was in January, just eight cents more than what it was in December 2014 and only 32 cents (or 1.6 percent) higher than it was a year ago.

In other words, nominal wages are just barely keeping up with the rate of inflation. As a result, even though productivity and corporate profits are up, the workers who are producing more and creating those profits are pretty much in the same position as they were at the start of the current recovery.

Here’s the explanation offered by Matt O’Brien:

It’s just the unemployment, stupid. Or maybe the underemployment. Between people who can’t find the full-time jobs they want, people who haven’t been able to find any jobs after looking for at least six months, and people who think things are so hopeless that they’ve given up looking for now, there are a lot more people than normal stuck on the margins of the labor force. And these “shadow unemployed,” according to the Fed, exert just as much downward pressure on wages as the regular unemployed. Put it all together, and wages haven’t recovered because the economy hasn’t fully recovered.

That’s pretty much the same conclusion I arrived at back in January:

The fact is, during the downturn, employers respond to slack demand not by lowering nominal wages (hence the “downward rigidities” mainstream economists so deplore), but by firing workers, replacing full-time workers with part-time workers, and increasing productivity (which mainstream economists can only celebrate). The result is a growth in the Industrial Reserve Army (as we can see in the dramatic growth in, and the still-elevated level of, the so-called U6 unemployment rate).

That pool of unemployed and underemployed workers (plus the availability of workers abroad, in China and elsewhere, together with the low level of unionization and the introduction of new, labor-displacing technologies) serves to regulate the level of wages: keeping nominal wages from rising even as economic growth picks up. In other words, employers don’t need to increase wages, either to keep their existing workers or to hire new ones. There are so many members of the Reserve Army of Unemployed and Underemployed workers willing to take whatever jobs are available that employers simply don’t need to increase wages.

Milanovic

This chart, devised by Branko Milanovic, illustrates the remarkable economic recovery that has taken place in the United States beginning in 2010—a recovery, that is, not for the vast majority of people, but for a tiny minority at the top.

Consider the first period (blue line). It is remarkable that real income of all groups declined. But the hardest hit were the rich, with percentage losses increasing as we move toward to right portion of the graph, and the very poor.  I am not an expert on US welfare system, but it seems to me that the system failed to protect the poorest people from substantial income losses between 2007 and 2010. But for the bulk of the population, the years of the Great Recession meant a modest real income decline. The median person’s real income went down by a little over 3 percent. The upper middle class (the people between the 80th and 90th percentiles) did not see much change in their real income. But the top 10% clearly lost out: notice how the blue line starts decreasing ever more steeply as you move toward the top 1%. The Gini coefficient decreased by less than 1 point.

Now, look at the red line which shows the real change in the second period. It is almost a mirror-image of what happened in the first. The growth was zero or positive along the entire distribution, the strongest among the very poor (around the lowest 5th percentile) and among the rich (the top 10%). Median inflation-adjusted per capita income decreased by just under 1%. For the two top percentiles, which got clobbered by the recession, real income growth was in excess of 10%.

In other words, those at the very bottom lost a great deal during and immediately after the crash and, as a result of special measures (like an expansion of the food stamp program and increases in state minimum wages), they’ve managed to claw back some of what they lost—and they’re still poor. For pretty much everyone else, they lost out (as a result of growing unemployment and stagnant wages) and they still haven’t recovered (even though the unemployment rate has declined but their wages are still pretty much where they were before the crash). And those at the top? They lost a great deal (because of the initial decline in corporate profits and the stock market crash) and, as a result of the nature of the recovery (which has successfully restored the profits of large corporations and Wall Street equities), have now recovered most of what they lost—and they’re still rich.

So, after a brief hiatus (in 2009), the United States is back to having the most unequal distribution of income of all the rich countries on the planet.

And, unless things change (and I don’t mean the Fed’s tinkering with interest rates or one or another corporation raising wages above the federal minimum), that obscenely unequal distribution of income is only going to continue to get worse.

GamblE20150208_low

Special mention

unemployment_top_ten

PettJ20150207A_low

Special mention

-1 leo-cullum-i-ve-stopped-looking-for-work-which-i-believe-helps-the-economic-numbers--new-yorker-cartoon

wsj Reuters

We really need to go beyond the headlines to make sense of today’s jobs report.

The headlines are replete with “full health” and “strong” gains (in the Wall Street Journal and Reuters, respectively), based on total nonfarm payroll employment rising by 257,000 in January. But the report itself reveals not much has changed: not the official unemployment rate (5.7 percent), the number of unemployed workers (9 million), the jobless rates for different demographic groups (adult men, adult women, whites, blacks, Asians, and Hispanics), the number of long-term unemployed workers (2.8 million), and so on.

In fact, some numbers have gotten even worse—for example, the unemployment rate for teenagers (up to 18.8 percent) and the U6 unemployment rate (up to 11.3 percent).

About the only positive news is the rise in hourly earnings:

In January, average hourly earnings for all employees on private nonfarm payrolls increased by 12 cents to $24.75, following a decrease of 5 cents in December. Over the year, average hourly earnings have risen by 2.2 percent. In January, average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $20.80.

HourlyEarningJan2015

Even then, from a bit longer view, there’s not much to cheer at all: average hourly earnings continue to limp along at an annual growth rate of about 2 percent, far below previous increases and much below the growth in productivity.

Looking beyond the headlines, one thing then is clear: there’s been very little recovery for the majority of people more than five years after the official end of the Great Recession.

Class War by Other Means

Special mention

PettJ20150206A_low ows_142309695430914

greece_debt_suicide AN61350475epa04584133 Suppo

Greece has gone from tragedy to triumph—from the tragedy of austerity-induced suicides to the triumph of the anti-austerity landslide victory of Syriza.

So, before we get lost in the media hysteria of “radical leftists,” “firebrand” leaders, and jittery international financial markets, let’s be clear about what Greek voters rejected on Sunday.

Growth-in-GDP-since-2007-by-Nation

Greek workers rejected an austerity program that has led to a decline of more than 25 percent in Gross Domestic Product since 2007.

Government-Spending-Dashboard1

They rejected an austerity program that cut government spending by almost 40 percent since 2009.

pvxapxvgte29lfqb3migdg

They rejected an austerity program that led to a dramatic rise in unemployment—to 29 percent.

Greece-youth-unemployment

They rejected an austerity program that led to a dramatic rise in unemployment among young people—to over 60 percent.

141204111036-change-in-real-wages-620xa

And they rejected an austerity program that, in just one year (2013), led to a decline in real wages of 6 percent.

In other words, in decisively rejecting the austerity program, Greek voters have found a way to move beyond tragedy and to give an enormous electoral triumph to Syriza.