The Bureau of Labor Statistics released its monthly job numbers this morning. We’ve made the point before that major media outlets cover BLS figures superficially, only reporting the number of jobs created each month and the official unemployment rate (U-3).
By those measures, August 2018 was a very good month. Nonfarm payrolls grew by 201,000 and the unemployment rate remained “historically low” at 3.9%.
Job growth is steady, and the fact that more Americans are going back to work, and more are being hired for long-term and relatively well-paying jobs, is encouraging.
So, too, is wage growth. Average hourly earnings increased 0.4% in August, and the annual rate increase was 2.9%. This means there is finally some positive wage growth for workers but, when adjusted for inflation, most American workers are earning less than they were 30 years ago. When there is a 30% increase in annual average earnings we can start to take seriously employers’ claims they are having a hard time finding workers. Until then, their complaints are only efforts to lobby Congress for an increase in the number of foreign workers coming into the United States.
Last month, the Business Roundtable, a very powerful lobbying organization of some of the world’s most profitable multi-national companies, sent a letter Kirstjen M. Nielsen, Secretary of the Department of Homeland Security, complaining of “labor shortages” and begging her to facilitate the inflow of millions more foreign workers.
Neil Kashkari, President of the Minneapolis Fed, has dismissed in no uncertain terms the grousing of employers who refuse to increase wages in order to attract more American workers.
Mostly whining. We are all looking for an explanation why demand is outstripping supply but not showing up in price. The answer: Occam’s razor. Demand isn't outstripping supply (yet). How will we know? When it shows up in price.
Wages increases are positive but still modest. Now is the time to cut the inflow of foreign labor to give American workers the raise they deserve.
The Real Unemployment Situation
The official unemployment rate is historically low because the number of people who are not in the labor force is historically high. The labor force participation rate is at its lowest point since 1978, a time before women came into the workforce in large numbers. And consider that the U.S. population has increased by 106 million since 1978.
Ironically, if a significant percentage of Americans were to reenter the workforce and actively seek work, the unemployment rate would rise substantially. And that would be a good thing if they were eventually able to secure employment.
As it stands now, the labor force participation rate is well below what it was even at the height of the Great Recession. The participation rate dropped from July to August and is down half a percentage point from last year because 1.8 million more people have dropped out of the labor force since August 2017; 700,000 dropped out last month alone.
Only about half of those who drop out of the labor force are retiring, and we know many Americans are working past the age of 65. There is no shortage of workers in the United States, and no shortage of Americans willing to work. Of those not in the labor force, 5.5 million “want a job,” according to the BLS. Add that to the 6.2 million unemployed who are actively seeking a job. That’s a labor pool of 11.7 million.
And so, of course, Congress is working overtime to increase competition for unemployed Americans, and to put downward pressure on the wages of those Americans who are working. Take for example the expansion of H-2B visas (low-skilled non-agricultural guest workers) in the current DHS appropriations bill. Congress has added a provision to not count returning H-2B workers against the cap, which effectively allows for thousands of additional H-2Bs to come into the United States to take jobs Americans are already doing.
Last month, the unemployment rate for workers without a high school diploma shot up by 12%. The unemployment rate for those workers is 32% higher than the overall average. Keep in mind, these figures are for those who were working and have been recently laid off.
There is no shortage of Americans willing to work.
ERIC RUARK is the Director of Research for NumbersUSA
Updated: Fri, Sep 7th 2018 @ 11:29am EDT