–Wages Decelerate to Annual +2.9% Through December
WASHINGTON (MaceNews) – The latest jobs numbers Friday and the even more current initial jobless benefit claims total on Thursday showed that while American workers are seeing the hope of an acceleration in wage gains fade as growth moderates the pace of hiring remains exceptionally strong. Most analysts see the hiring subside somewhat later in 2020.
There was nothing in the latest data to suggest the Federal Reserve will be impelled to change its disappearing act any time soon, remaining somewhat accommodative even as it chooses to make no further moves to help or hurt beyond what it insists are only technical adjustments of the balance sheet to maintain liquidity in the money markets.
The 2.9% over-the-year increase in wages through December, falling below even the 3% threshold met or bested going back to July of 2018, showed how the expectations for steadily accelerating wages have been dashed since a year ago – when the annual increase was 3.2% through January 2019. The rate of change for disposable income is always somewhat higher and has represented some real progress above inflation, but at a far slower pace than before the financial crisis.
A tighter labor market had always been assumed to be a friend of wage hikes. Now that assumption, like that for an automatically higher inflation rate as the expansion ages into record length, is being consigned to the dustbin of economists’ rules of thumb. More threatening has been the specter of “Japanification,” when monetary policy becomes powerless to prevent disnflation.
The unemployment rate in December, at 3.5% – the second month of 2019 so low – is half a point below than it was at the beginning of the year and at a half century low. The number of unemployed people, at 5.8 million was about half a million fewer than a year earlier. The 2.1 million additional 2019 jobs were the least since 2011.
The 145,000 additional payroll slots in December was only slightly below consensus expectations and part of an 184,000 average monthly gain in 2019’s final quarter. That’s nearly 40,000 below 2018’s average. Economists generally see more slackening in 2020 toward a total gain of around 150,000, still more than the number of anticipated new entrants to the workforce and so keeping the unemployment rate from any dramatic increase..
The 12,000 seasonally adjusted decline in the month’s manufacturing category was no surprise given other indicators during the month as tariffs depress goods exports. Construction rose a healthy 20,000. Retail was up 41,000, and health care 28,000. The category closely correlated to the vigor of the expansion, professional and business jobs, showed some below-trend sluggishness with only a 10,000 increase.
The labor participation rate held at 63.2% in December, a tenth below its high for last year, and has generally been seen as a positive outcome in the context of Baby Boomer retirements. But it may never regain the historic heights of many years past before population increases waned and the influx of women into the labor force tapered.
The slowing of the birth rate and restrictions on immigration promise nothing but more gradually slowing economic dynamism year by year which along with near stagnant productivity gains spell a continual long-term erosion of national prosperity without fundamental structural reform.
Meanwhile, the record low in the adjusted rate of unemployment as measured by the broadest criteria, dubbed U-6, reached the lowest in the quarter century it has been tabulated, 6.7%. The unadjusted rate was even lower, 6.5%, in November.