The Growth Dividend for Workers The October jobs report shows the shared gains of a stronger economy.
https://www.wsj.com/articles/the-growth-dividend-for-workers-1541201213
Don’t think tax reform and deregulation matter for working people? Consider the evidence from Friday’s gangbuster jobs report for October that showed the tangible dividend for workers from faster economic growth resulting from better economic policy: More jobs to choose from and higher pay to boot.
That’s the essence of the news that the marvelous machine called the American economy created 250,000 new jobs last month, including 246,000 in private industry. Average hourly wages rose again and are now 3.1% above a year ago, the fastest increase in a decade. (See the nearby chart.) This is the growth dividend that Republicans promised if the dead weight of Barack Obama’s policies could be lifted from the backs of American business and workforce.
The economy has now added 218,000 jobs on average over the last three months, up from 210,000 over the last year, as the unemployment rate held steady at 3.7%. That’s remarkably strong labor growth for an expansion that is nine years old at what some economists claim is already full employment.
Apparently thousands of Americans have been waiting for the right job, or a better paying one, because the civilian labor force grew by 711,000 in October and four-fifths of them found jobs. Job growth was especially robust in leisure and hospitality (42,000), health care (35,600), manufacturing (32,000) and transportation and warehousing (24,800).
Hurricane Florence, which struck the Carolinas in September, has caused some noise in the data. But the big job gains in October offset tepid payroll growth in September. Labor force participation ticked up 0.2 percentage points last month to 62.9%, which is at the higher end of its range in recent years.
More auspicious, the labor participation rate for prime working-age individuals (ages 25 to 54) has risen 0.7 percentage points to 82.3% and for teens has increased to 35.5% from 34.7% over the last year. This labor-force growth has been offset by a decline in participants ages 20 to 24, perhaps due to more students relying on loans and grants to pay for college.
Labor force participation for those without a high school diploma has also increased to 47.7% from 46.2% over the last year as employers continue to pull lower-skill workers from the sidelines. Teen unemployment has fallen to 11.9% from 13.7% since October 2017. So much for growth benefiting only the rich.
Some are saying the 3.1% increase in average hourly wages isn’t all that great because it is measured off a bad month a year earlier. Then again, wage growth has averaged 3.4% over the last three months, and 3.3% for the last six months, which would fit with the faster GDP growth and faster productivity gains in the last two quarters.
It’s also good news that average hourly wages for production-level workers have climbed 3.9% and 4.5% for manufacturing employees over the last three months. The Labor Department’s compensation survey this week showed that wages and salaries over the last year have been growing fastest for those in lower-skilled fields such as leisure and food service (3.8%) and sales and transportation (3.7%). Over time more business investment will lead to greater worker productivity, which will show up in higher wages.
The robust jobs report should counter some of the pessimism following last month’s GDP report that showed 3.5% growth in the third quarter but a disappointing 0.8% increase in business investment. This data could later be revised, and strong job growth in manufacturing—32,000 in October versus 51,000 for all of the third quarter—suggests businesses expect faster sales in durable and other goods.
One drag on growth has been uncertainty caused by President Trump’s trade policies. Tariffs on aluminum and steel as well as a panoply of Chinese products are making businesses rework supply chains and raise prices. It’s worth noting that employment in primary and fabricated metals both declined in October. Some manufacturers have reported shifting production overseas to skirt the tariffs.
Another hindrance has been transportation bottlenecks, which have raised freight costs and delayed shipments. More truck manufacturing augured by strong job growth in transportation equipment could break the logjam. Another major constraint on growth could soon be a shortage of workers as the Labor Department reported 7.1 million job openings in August.
All of this shows that supply-side policies help working Americans far more than the income redistribution and subsidy schemes favored by liberal Democrats and GOP “reformacons.” GOP growth policies rescued an economy that was fading fast. Growth and prosperity are what’s really on the ballot on Tuesday, not Donald Trump’s rhetoric.
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