Not So Fast on the All the Positive News on Jobs for April
As a friend of mine from Kentucky used to say, “Its all accordin’ to the way you look at it”.
The day's leading report was the Labor Department's job report, which showed employers added 157,000 jobs to payrolls in May, up from a revised 80,000 gain in April.
The unemployment rate stayed at 4.5 percent, in line with forecasts. While the number of those listed as unemployed crept up by 18,000, that was outpaced by the gain of those with jobs.
The report showed average hourly wages rose 6 cents, or 0.3 percent, to $17.30, also in line with forecasts. The average hourly wage is now up 3.9 percent from a year earlier, above the 2.6 percent gain in prices for the 12 months ending in April.
When I look at average hourly wages for production workers I follow the lead of Joe Ellis and look at real average hourly wages for production workers on a year over year (YOY) basis. From this perspective the growth in real average hourly wages has been declining since the peak in October 2006. The monthly growth rate starting with October has been 2.42%, 2.26%, 2.00%, 2.12%, 1.76%, 1.61%, and 1.46%. Of the 6 recessions since 1965 a decline in the real average hourly wages for production workers led the recession 5 times. Also of the 10 major bear markets since 1965 a decline in the real average hourly wages for production workers led the bear market 7 times. The real average hourly wages for production workers could be a good leading indicator.
Also in spite of all the “controversy” on whether or not the unemployment rate is useful in predicting recessions, the data clearly indicates that the unemployment rate is a lagging indicator.