Where have all the workers gone?
On Friday the Labor Department said that the unemployment rate fell to 3.9% in April, which is the lowest rate since Bill Clinton was in the white House.
Now if this number had any relevance to the workforce, I would have written about it when it was released. But it doesn’t mean anything really.
To say there were only 3.9% of the potential workers still looking for a job is preposterous.
The people who are not counted in that number are in the millions.
- College graduates
- Those who are jobless, but no longer collecting unemployment benefits
- Part-time workers
- Retirees looking for part-time work
The U6 jobless rate, which includes people who can only find part-time work and those who’ve gotten so discouraged they recently stopped looking, fell to 7.8.% in April — the first time it has been below 8% since 2006.
A better barometer of the workforce is wages. If you can’t find workers, then you need to raise the wage to entice job seekers to apply. Or if you wish to keep good employees you give them a raise or bonus, or so goes the narrative.
Now we saw companies as a result of Trumps new tax law give one-time bonuses to employees, but that is not reflected in this data also released Friday by the Bureau of Labor Statistics.
The average wage growth for April was a startling 4 cents to $26.84 an hour with average work week at 34.5 hours.
So what do these two numbers say about the job market?
There is little premium being offered by employers broadly to find or retain workers and two, there are many, many jobs not offering any additional benefits since they are not working full-time.
This is not a new phenomenon, the hourly pay rate has increased 67 cents over the last year. So in simplest of economic theory there is plenty of supply and little demand in the job market.
Now, the Street takes all this information into account, and we see why The Fed did not raise rates recently. As I wrote in January, we will get one rate increase in 2018.
You cannot have inflation, without wage increases and a 67 cent rise over the last year is far more important than 3.9% jobless rate.