The Job Situation in April: Still Not Bad Enough for the Fed?
On May 4, the Bureau of Labor Statistics (BLS) released its job report for April. Unemployment fell a tenth of a point to 3.4%, and 235,000 jobs were added by non-farm employers. In most demographic categories, the unemployment rate fell by a tenth of a percent or more. The rate for Black workers–4.7%–was the lowest on record. It was still higher than the rate for whites, but not twice as high, as is often the case. The Hispanic rate fell by .2%, and the Black teen rate went down. Hidden unemployment rose a bit because fewer casual job-searchers found jobs. On the whole, the numbers were pretty good. And adding three million employed people over the last year was a plus for workers.
Big job increases since the pandemic slide were largely the result of huge infusions of federal money. We should be pleased about that. The United States avoided a prolonged COVID depression, and its economy is in better shape than are many rich capitalist economies. But good news about job creation is bad news to Federal Reserve officials and, sometimes, to President Joe Biden. They want weaker labor markets, even though we are not close to real full employment or decent pay. The Fed diagnosis, as always, focuses the inflation problem on rising wages, not corporate price-gouging.
I know, the Fed does not directly control corporate pricing -mechanisms. But how about a lecture from Fed chair Jerome Powell to the effect that corporations should hold the line on prices? And what has the executive branch done about business pricing lately? Very little. Do we have to shelter business price hikes that yield cash for dividends, stock buyouts, and the pay packages of millionaire executives? Of course.
Real Wages Aren’t High and They Aren’t Rising
Fed officials have been trying to cut employer demand for workers and thus wage growth. They want at least a mild recession. But can anyone actually show that rising wages are pushing prices rather than chasing them? Real (after-inflation) hourly wages for all private non-farm workers are down a half percent since April of 2022. They are hardly keeping up with inflation. But the Fed wants to cut wage increases, whether or not they have been the main propellant of inflation.
And remember that average pay isn’t high. In the private sector the average hourly wage is a bit over $28.00. For 52 forty-hour weeks, you would gross $58,240. Who would complain about that annual wage? Well, probably many people trying to raise a family on that amount. And, of course, there are millions of workers who make much less than the average. About a third of all workers earn less than $15 an hour; for Black workers, the fraction is almost a half (47%). These are the people for whom a real wage decline–the current goal of Federal Reserve policy–is a terrible idea.
Not Too Many Jobs; Too Many Bad Ones
We have long had a good-jobs shortage, but we haven’t done much about it at the federal level. Congress and the president could not legislate even a $15.00 minimum wage. And while $15 was an important goal in the teens, it is pretty much poverty pay in the twenties.
While we are on the subject, it is a disgrace that the federal minimum wage is still $7.25 an hour. And, incredibly, as many readers know, that was not low enough for some conservatives and business owners. In many states employers may pay workers as little as $2.13 an hour and assume that workers reach the federal level through tips. Most workers earn more than $7.25, but the fact that this is our official minimum is a statement about what kind of society we are–one that enshrines sub-sub-poverty wages in federal law. By the way, most states with a low tipped minimum wage are the usual conservative suspects in the south and the midwest, but at least one is not: the president’s home state of Delaware has a tipped minimum of $2.23.
Is Recession a Good Idea for the Economy Right Now?
Aside from my opposition to policies that limit wage growth by throwing people out of work, there are other reasons to fear an economic downturn. Are U.S. leaders confident that the next recession will be mild? There are a fair number of economic weaknesses that hint at broader dangers ahead:
- An unemployment rate of 3.4% looks like full employment, but it is not. Real unemployment, counting part-timers who cannot find full-time work, and job-wanters who don’t fit the BLS definition of being unemployed, is 8.7%. A slower economy will raise that number.
- The Gross Domestic Product grew at a slow annual rate of 1.1% in the first quarter of the year.
- There are wobbly institutions that may collapse in a recession. The banking crisis is not over. A bank called PacWest is losing deposits. The federal debt limit crisis may not be resolved soon.
- Initial claims for unemployment benefits are not extremely high, but they have been higher in the last two months than at any time in the previous year.
- The number of job vacancies–indicating demand for workers–is still high, but in March it was 2.4 million vacancies below the level of March 2022. Labor demand seems to be slipping and some employers are firing workers. But others may be reluctant to lay off employees, for fear of a new labor shortage down the road rather than a recession.
- Worker quit rates, one sign of whether employees feel confident about finding other jobs, are still high, but they are a little lower than they were a year ago.
All in all, if you depend on wages for a living, the Fed is not your friend.