This morning I noted Another Wild Jobs Report: Payroll Employment Rose a Disappointing 20,000.
The month-over-month jump in hourly earnings are worth a closer inspection.
Hours and Wages
Average weekly hours of all private employees fell 0.1 hour to 34.4 hours. Average weekly hours of all private service-providing employees was flat at 33.3 hours. Average weekly hours of manufacturers fell 0.1 hours to 40.7 hours.
Average Hourly Earnings of All Nonfarm Workers rose $0.11 to $27.66. That a 0.51% gain. Average hourly earnings of private service-providing employees rose $0.11 to $27.43, a gain of 0.40%. Average hourly earnings of manufacturers rose $0.12 to $27.38, a gain of 0.44%.
Average hourly earnings of Production and Supervisory Workersrose $0.08 to $23.18. That’s a 0.35% gain. Average hourly earnings of private service-providing employees rose $0.10 to $22.92, a gain of 0.44%. Average hourly earnings of manufacturers rose $0.06 to $21.90, a gain of 0.27%
Year-Over-Year Wage Growth
- All Private Nonfarm from $26.75 to $27.66, a gain of 3.4%
- All production and supervisory from $22.40 to $23.18, a gain of 3.5%.
Monthly swings can be wide, so it’s best to look at trends in year-over-year growth, as the lead-chart does. Here is a closer look.
Year-Over-Year Wage Growth vs CPI 2013-2019
Starting August 2018, the year-over-year hourly earnings growth has been over 3% every month but October 2018. That’s 6 out of seven months.
Phillips Curve
The Phillips Curve clowns will no doubt be singing ah ha! See!
Dismiss the thought. The Phillips Curve is random. It appears to work about 50% of the time. That makes it useless.
Opinion 1: Inflation
Average hourly earnings growing their most since the crisis. Great in itself, but on the face of it growing inflationary pressure to combine with slowing growth is not great. pic.twitter.com/JL94vMxZf1
— John Authers (@johnauthers) March 8, 2019
Opinion 2: Inflation
Soft payrolls is noise.
Cycle-high growth in hourly earnings is not.
That’s all.— Ian Shepherdson (@IanShepherdson) March 8, 2019
Opinion 3: Inflation
Today’s payroll data were unusually noisy, which we mostly discount. What’s not noisy is the steady rise in wage inflation (black), with average hourly earnings at 3.3% q/q (annualized) and clearly trending higher. Contrast this with a market pricing cuts from the Fed… pic.twitter.com/lQBnetLnjC
— Robin Brooks (@robin_j_brooks) March 8, 2019
Opinion 4: Stagflation
“Surprisingly weak nonfarm payrolls growth and stronger than expected average hourly earnings growth of 0.4%, which pushed up the year-over-year wage rate to 3.4% — the highest since April 2009. Translation: slow growth with increasing inflation pressure.” #Stagflation pic.twitter.com/GjbzpEwXIm
— Michael D. Underhill (@MikeDUnderhill) March 8, 2019
Opinion 5: Benign
Wage growth up for unwelcome reasons: w/ economy slowing, growth in total hours worked has fallen faster than growth in total pay, boosting AHE growth. According to ECRI’s USFIG, the broader U.S. inflation cycle will remain in a downturn. 2018 explanation: https://t.co/2oYvu74sFK pic.twitter.com/6MgxvvupAP
— Economic Cycle Research Institute (ECRI) (@businesscycle) March 8, 2019
Today’s rise in AHE won’t change cyclical direction of inflation, which is clearly down. USFIG will be updated later this morning. https://t.co/ZbUgBuYbQt
— Economic Cycle Research Institute (ECRI) (@businesscycle) March 8, 2019
Opinion 6: Mine
I don’t know, and they don’t either.
I could not produce the charts of Lakshman Achuthan in Fred. But whether or not his charts are meaningful, I think Achuthan is on the right track.
Asset bubble bursting events are deflationary. The demographic cycle is deflationary. The global slowdown, especially in China and Europe is deflationary. The huge jump in retail store closings is deflationary. The auto and housing trends are deflationary.
Finally, Trump’s tax cut stimulus is about over already. Some of these wage gains are related.
If one believes we are late cycle and a recession is coming bet on Achuthan.
Mike “Mish” Shedlock
I see more dumping, it comes in many forms. Even money is is dumped, it’s called QE/stimulus, and comes in many forms, like rollover and issuing notes. Quality is very poor on many goods now too, and things like health care is no exception as the U.S. always falls behind other countries. Higher wages affords higher debts because debt is serviced, but also masks costs, as in, Americans savings trajectory is down, China up. How can you have a recession when spending both government and consumer is on parabolic upward curves.
Still enormous numbers of workers, particularly STEM workers, on the sidelines. Begging to participate in the economy, but the employers aren’t interested.
Until you have a shortage of STEM workers, which actually existed in the 1970s, its not really reasonable to expect inflation. As STEM workers can usually be productively employed to improve productivity and create deflationary pressure.
The size of the output gap (and hence, hypothetical Fed policy) can be merely looking at the graduation statistics of major schools of their STEM workers. Currently major STEM universities can only substantiate 1 out of 3 of their graduates finding post-graduation jobs.
“… and Amazon also stopped ordering from a lot of their suppliers. Something is up.”
I caught that and agree with Greggg’s conclusion
No ones hours were cut. Whole Foods like every other retailer is desperate for workers. Most are being Hired as full time hourly workers with full benefits and time and half overtime after 40 hours
Part of it may the Obamnation care laws Full time employees need to be offered health insurance and by keeping hours low they will not have to offer health insurance.
I clearly remember the wage/price spiral of the 70s and the things that lit the fuse under the inflation rocket: Guns and butter, compliments of Lyndon Johnson’s Great Society funding and fighting the Vietnam war on credit. Come budgeting time, every HR rep through the door had the latest labor rates from US cities and was absolutely adamant that we had to ‘pay to play,’ and In a closed labor market, we did.
It’s different this time. The labor market lists have been updated and have strange names like Vietnam, Cambodia, India, etc. listed on them thanks to globalization. In fact, IBM now has more employees in Asia than north America. They’ll all be there if American wage demands become non-competitive.
When Nixon passed the wage and price controls under Executive order 11615. 8-13-1971 he announced the end of the dollar/gold conversion and 2 days later he ordered a freeze on all wages and prices for 90 days and repeated the mistake again in 1973.
Yes indeed, I remember it well, but being a young, trusting soul, I was reassured by the soothing weasel wording assurance in the announcement that the measure was “temporary.”
Had it not been temporary, taking us off the gold standard would have freed up politicians to run massive deficits willy-nilly forever by just printing more dollars….
Wage costs are just one input to overall production costs, and often not the biggest. And wage growth is only inflationary if a business has the power to increase prices. So if a business has the power to increase prices, why wouldn’t they have already? They hate profits?
Let’s see a chart of productivity growth over the last 30 years relative to wage growth and see how close we are to an inflationary burst.
They already have. Prices for most retail items especially apparel,. Electronics, furniture etc are up dramatically. And no online really isn’t any cheaper than what is in physical store cc
Didn’t we already see how this plays out with whole Foods?
Bezos gave everyone a $2-$3/hour raise to $15/hr. and then cut their hours by 25%.
So the employees are now expected to do 28 hours of work in 20 hours.
I don’t see how this is inflationary.
… and Amazon also stopped ordering from a lot of their suppliers. Something is up.