by Thomas Palley
April’s Employment Report showed a gain of 223,000 jobs and a further one-tenth percent decline in the unemployment rate to 5.4 percent. The good news is the report shows the economy continues to nudge forward and create jobs for newcomers into the labor force. The bad news is the economy is not growing fast enough to raise wages.
Average hourly earnings for production & non-supervisory workers, who are eighty percent of the workforce, are up just 1.85 percent over the past year. In April, the rate of wage increase actually declined.
The broad (U-6) measure of unemployment stands at 10.8 percent, which is far above the level of past economic cycles. Furthermore, unemployment is widespread across all business sectors. The labor force participation rate also remains at a historically low level, indicating that many workers stand ready to re-enter the work force when jobs become available. Together, these conditions show labor supply is plentiful and there is no threat of inflationary shortages.
Given the housing recovery and credit financed auto purchases, our economy should be generating many more jobs. An important reason why it is not is the trade deficit which surged to $51.4 billion in March. That explains why manufacturing job growth has ground to a standstill and why the average manufacturing work week and factory overtime hours edged down.
The trade deficit is due to our failed NAFTA trade policies and the strong dollar, and it means we are creating jobs offshore rather than within the US economy. To return to full employment and shared prosperity we need the Federal Reserve to hold off raising interest rates. We also need to close the trade deficit and fix our flawed trade policies, which begins with Congress saying “no” to Fast Track trade authority that would promote more bad trade agreements.
This article first appeared on Thomas Palley’s blog here