September jobs report well below expectations, real earnings decline

Steve Benen has the September jobs report. Job growth cooled in September, falling short of expectations:

Though there were some concerns about the effects Hurricane Florence may have had on the U.S. job market, most projections pointed to monthly job growth in September around 194,000. The initial data suggests we fell short by a significant amount.

The September results are 25 percent below what economists had forecast.

SeptemberJobs

The Bureau of Labor Statistics reported this morning that the economy added 134,000 jobs in September, while the unemployment rate dropped further to 3.7%. The 134,000 is the lowest of the year to date.

On a more encouraging note, the revisions for the two previous months – July and August – were quite good, with a combined net gain of 87,000 jobs as compared to previous BLS reports.

In terms of the larger context, this morning’s data points to 1.875 million jobs created so far in 2018, which is quite good, and which is an improvement on the totals from the first nine months of 2017 (1.53 million). It’s also roughly identical to the numbers from 2015 (1.84 million) and 2016 (1.85 million).

That said, this year’s tally is still short of the totals from the first nine months of 2014 (2.19 million).

When the White House says this is the best growth “ever,” it apparently means “since 2014.”

As for the political implications, Donald Trump has now been in office for 20 full months – February 2017 through September 2018 – and in that time, the economy has created 3.8 million jobs. In the 20 full months preceding Trump’s presidency – June 2015 to January 2017 – the economy created 4.15 million jobs.

Here’s another chart, this one showing monthly job losses/gains in just the private sector since the start of the Great Recession.

SeptemberPrivate

As Daily Kos notes:

It should be noted that in the final 20 months of Obama’s presidency, the average monthly job increase was 208,000. Under Trump, the monthly average over the 20 months of his term has been 190,000.

It should also be remembered that by this time in 2008, the job market had been in a six-digit monthly free-fall for half a year. This continued for another 13 months, worsening right as Obama took over the reins from George W. Bush. Then, thanks to an Obama-initiated economic stimulus that some Democrats labeled necessary but inadequate, and 90 percent of Republicans flat-out opposed — [and are currently running misleading ads calling it the “failed stimulus”] — the number of available jobs grew steadily, albeit with excruciating slowness over the next six years [because of GOP obstruction and economic sabotage]Last month marked the 97th consecutive month of this job growth. The only thing Trump can take credit for is not having steered this growth off the rails. Yet.

The White House has not yet offered an explanation for why job growth has slowed.

Axios.com recently offered an explantation. Preparing for the end of the tax cut “sugar rush”:

Analysts and economists say there is a semi-imminent doom and gloom coming for stocks and the economy, thanks in part to a diminishing boost from President Trump’s tax cuts.

Screen Shot 2018-10-05 at 3.15.19 PM

The big question: Is there a “sugar rush” from the tax cuts, and if so, does it matter enough that the market and economy will tank when it wears off?

One camp says don’t sweat the chart. Waning influence of tax cuts won’t have a disastrous impact on companies’ earnings growth, according to recent projections by Nationwide Financial’s Mark Hackett:

“Even factoring out the contributions from lower corporate taxes and share buybacks, earnings growth would still be at a healthy rate … indicating that most earnings strength is not coming from the ‘sugar rush’ of tax reform.”

The other side: JPMorgan says in a recent note that U.S. stocks are riding a “sugar high” thanks to the tax cuts and you should sweat that chart.

  • Analysts there say the end of the tax-cut impact will lead to dramatic earnings declines followed by cuts to earnings guidance.

The bottom line: We’re not going to know for a while, so for now, pick a side. If you’re in the sugar-rush camp, the question is, “When will the economy and markets come down from the high?” If you’re not, you’re hunting for data points that prove the economy’s 10-year expansion is on solid footing, with or without the boost from the tax cuts.

Economists Nouriel Roubini and Brunello Rosa recently analyzed that We are due a recession in 2020 – and we will lack the tools to fight it (snippet):

As we mark the 10th anniversary of the collapse of Lehman Brothers, there are still ongoing debates about the causes and consequences of the financial crisis, and whether the lessons needed to prepare for the next one have been absorbed. But looking ahead, the more relevant question is what actually will trigger the next global recession and crisis, and when.

The current global expansion will likely continue into next year, given that the US is running large fiscal deficits, China is pursuing loose fiscal and credit policies, and Europe remains on a recovery path. But by 2020, the conditions will be ripe for a financial crisis, followed by a global recession.

Their 10-point analysis is sobering. The yahoos currently running our government are totally unprepared.

Daily Kos adds:

The BLS reported that average wages have risen 73 cents since September 2017, or 2.8 percent. That rise compares with inflation currently running at an annualized 2.7 percent. In other words, just a sliver of gain for workers.

Robert J. Shapiro, President Bill Clinton’s undersecretary of commerce for economic affairs, recently wrote Don’t be fooled: Working Americans are worse off under Trump:

Despite robust economic numbers during the Trump presidency, the American public has seemed curiously unmoved by such good news as the lowest U.S. unemployment level in nearly half a century. Its enthusiasm might have been dampened by this underappreciated economic reality: The typical working American’s earnings, when properly measured, have declined during the Trump administration.

[T]he president’s economic team touts positive earnings data from the Bureau of Labor Statistics that suggest rising wages and salaries. But the figures are misleading. They focus not on how much an average working person earns but on the “average earnings” of all employed people. In times of rising inequality, employees at the top pull up “average” earnings. Shift to the bureau’s earnings data for an average or “median” working person, and most of those claimed gains disappear. Another catch: The data used by the White House doesn’t account for inflation. Adjust the median earnings data for inflation, and the illusion of progress evaporates.

Let’s examine how much these technical sleights of hand distort what’s happening to people’s earnings. Using the White House’s preferred data, average earnings rose from $894.06 in January 2017 to $937.02 in August 2018. That suggests impressive gains of $42.96 weekly over the 20-month period and $30.02 weekly over the past year. But what about median earnings rather than average earnings — that is, earnings of those in the middle of the distribution?

The Bureau of Labor Statistics has a different database for that view, and its quarter-by-quarter numbers show a very different picture. Median weekly earnings of all workers rose from $865 in the first quarter of 2017 to $876 in the quarter ending June 30, 2018. The typical working American’s earnings increased $11 weekly over 18 months, barely more than one-quarter of the economic progress touted by the White House.

Even that modest gain is not very meaningful. The significance of what people earn lies in what they can do with their earnings, and inflation eats away at what any of us can purchase or save. As a result, serious earnings analysis is always framed in inflation-adjusted, or “real,” terms. From January 2017 to June 2018, inflation totaled 3.77 percent, while the $11 increase in unadjusted weekly earnings over those 18 months represented gains of 1.27 percent.

To determine how much the real earnings of a typical working American fell during that period, simply adjust the $876 in median weekly earnings in the quarter ending June 30, 2018, for the 3.32 percent inflation that occurred in the 18 months from the first quarter of 2017 to that date. The result: $876 in June 2018 had the same value as $848.20 in January 2017. In real terms, the weekly earnings of a typical working American fell $16.80, or 1.9 percent, during Donald Trump’s first 18 months as president.

Another blow to the White House’s preferred economic narrative: The current earnings decline is a new development. Using the same measure, real median weekly earnings increased substantially during Barack Obama’s final 18 months as president.

Before adjusting for inflation, median weekly earnings increased during Obama’s last 18 months from $803 in the third quarter of 2015 to $849 in the last quarter of 2016. People’s average weekly earnings thus increased $46, or 5.73 percent, before adjusting for inflation. Over the same months, cumulative inflation from July 2015 to December 2016 was 1.12 percent, so the real earnings of a typical working person clearly increased. By how much? Adjust the median weekly earnings in December 2016 of $849 for the 1.08 percent inflation over the preceding 18 months, which comes to $838.82. In real terms, the weekly earnings of a typical employed American increased $35.82, or 4.5 percent, over Obama’s last 18 months in office, growing from $803 in the third quarter of 2015 to $838.82 in the fourth quarter of 2016.

In Ronald Reagan’s succinct terms, average working Americans are worse off under the Trump presidency than they were under Obama’s. Yes, low unemployment is something to applaud, but there might be a good reason that so many who have jobs aren’t clapping.

In short, you’re getting screwed by faith based supply-side “trickle down” GOP economics, America. Too many Americans are too damn ignorant about economics to realize it. And that is how the GOP gets away with it.





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