While last month’s 292,000 job gain will dominate headlines, revisions to previous months were pretty strong, too. The change in total nonfarm payroll employment for October and November was up a combined 50,000. So over the past three months, job gains have averaged a robust 284,000 per month. Now here’s what’s kind of weird: GDP growth for the fourth quarter is looking pretty weak, maybe 1% or so. So which data are giving the better read on the economy? JP Morgan, for one, thinks it’s the jobs numbers: “When confronted with such a sharp divergence between labor market and GDP data, we tend to see the labor market data as more informative for future developments.” I am biased toward that view, given that I suspect official stats mismeasure productivity and GDP growth
And what about wages? Average hourly earnings were flat in December on a month-to-month, basis, although up 2.5% year-to-year. This is probably still a labor market with slack. Besides slow wage growth, there are other metrics — such as long-term unemployment, those working part-time for economic reasons, and prime-age labor force participation — that suggest a labor market not yet returned to full health.
How much slack is there? Well as Goldman Sachs economists reckon, the unemployment rate should reach 4.6% by end-2016 with the U6 unemployment-underemployment declining to 8.9%, “indicating roughly full employment.” (MKM economist Mike Darda notes the prime-age employment/ population ratio was also flat in December at 77.4%, roughly 250 basis points below full employment levels, as he calculates things.) If Team Goldman is right, wages gains should accelerate in coming months even if GDP continues as its post-recession pace. Of course it would sure be great if better policy could help nudge that post-recession pace a bit higher …
from AEI » Latest Content http://ift.tt/1Zb7f3P
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