Recent data indicate that a “soft landing” is still in reach—the Fed should try to secure it: Ignoring disinflation signs heightens risk of recession
Last week’s release of data on gross domestic product (GDP) and employer costs are sending a message to the Fed as it meets to set interest rates: There is substantial disinflation in the pipeline that will allow inflation to normalize in coming months even if the labor market remains strong. But securing this “soft landing” will require patience.
- In the most important markets for normalizing inflation, the housing and labor markets, there are signs of noticeable disinflation happening.
- Further, the Fed has not been the only source of macroeconomic policy tightening this year—the fiscal contraction in 2022 has been highly significant and underappreciated. This contraction has, in turn, contributed to the very slow pace of demand growth over the past year.
- Combined, these facts give the Fed some breathing room to slow the pace of rate hikes, even if these disinflationary trends have yet to show up in the consumer price index (CPI). In short, the “soft landing,” wherein inflation normalizes without sabotaging today’s strong labor market, is still possible and the Fed should try hard to secure it.
Victory on overtime for New York farmworkers
After a long and hard struggle, farmworkers in New York State recently won the right to overtime pay after a 40-hour workweek. There is still, however, a long path to economic fairness for these critically important workers.
Without a doubt, the overtime pay increase is a substantial victory that was a long time coming. Once fully phased in, it will give farm laborers a raise of $34 to $95 per week.
Overtime pay will also nudge farm owners onto the economic high road, as Immigration Research Initiative and Economic Policy Institute have argued. By raising wages, it will reduce turnover and save significantly on recruiting and training costs. Where farm owners have the option, it will also nudge them toward more effective use of work time and investments in equipment that increase productivity, making farming in New York more sustainable in the long run.
Not So Free to Contract: The Law, Philosophy, and Economics of Unequal Workplace Power
Note: This blog is cross-posted to the Law and Political Economy blog.
Running through the fields of employment law, philosophy, political science, and economics is the pervasive assumption that employers and employees share equal power. This assumption, which distorts employment law so as to undercut worker protections, contradicts common sense, and evidence as well as any reasonable interpretation of recent history. Despite notable gains in worker power over the past two years, the erosion of worker power and the suppression of wages during the preceding four decades is well–documented. Substantial evidence shows that employer power is pervasive, especially relative to those without college degrees, minorities, and women—in other words, the vast majority of workers.
This blog post draws upon and serves to introduce a new issue of the Journal of Law and Political Economy, which aims to elaborate the role that the equal-power assumption plays in employment law and policy, and to provide new social science evidence challenging that assumption. The essays contained in this issue, as I describe below, demonstrate that the power to quit does not prevent worker exploitation and that the circumstances that inhibit workers from quitting contribute to substantial, systematic employer power over wages and working conditions. They also show that restricting the power of management—through minimum wage policies, collective bargaining, and codetermination—benefits workers without causing adverse economic outcomes for firms or the economy, contrary to oft-made claims made by jurists.
Labor market strong, but cooling in September: Public-sector employment continues to falter
Below, EPI economists offer their initial insights on the jobs report released this morning, which showed 263,000 jobs added in September.
From EPI senior economist, Elise Gould (@eliselgould):
Read the full Twitter thread here.
The unemployment rate fell to 3.5% in September, back to where it was in July, mostly for the “wrong” reasons as labor force participation declined. Two-thirds of the decline in the unemployment rate was due to the drop in the labor force and one-third from increased employment. pic.twitter.com/snor6FSdKK
— Elise Gould (@eliselgould) October 7, 2022
The private sector keeps chugging along while the public sector is faltering. With the September increase, private sector employment is now 0.9% above pre-pandemic levels while state and local jobs remain stubbornly 3.0% below its Feb 2020 level with little recent improvement. pic.twitter.com/txEIaCI29i
— Elise Gould (@eliselgould) October 7, 2022
After a troubling rise last month in Black unemployment accompanied by falling labor force and employment the last three months, Black unemployment fell back to 5.8% alongside increasing employment and participation.
Note: volatile series but hopefully a reversal in trend. pic.twitter.com/r1rsTAvWHq
— Elise Gould (@eliselgould) October 7, 2022
The fall in Black unemployment and rise in participation in September was experienced by both Black men and Black women. Again, huge disclaimer on data volatility for smaller demographic groups. pic.twitter.com/8Ol83CHmwt
— Elise Gould (@eliselgould) October 7, 2022
From EPI president, Heidi Shierholz (@hshierholz):
Read the full Twitter thread here.
The unemployment rate dropped to 3.5% in September, but mostly *not* for good reasons—the share of the working age population with a job held steady, while labor force participation dropped. (Though make no mistake, 3.5% unemployment is extremely low.) 2/
— Heidi Shierholz (@hshierholz) October 7, 2022
We’re clearly starting to see the effects of the Fed’s rate hikes, but the labor market is still extremely strong. However, it takes a while for higher interest rates to have a big impact and there’s a huge concern the Fed has overshot and secured a recession in coming months. 4/
— Heidi Shierholz (@hshierholz) October 7, 2022
One thing: there is still a giant gap in state and local govt jobs—they are down 600,000 since Feb ‘20, with over half of that, 317,000, in education. It’s crucial that state and local govts use their ARPA funds to raise pay and refill those jobs. 6/
— Heidi Shierholz (@hshierholz) October 7, 2022
The overall numbers mask big disparities for different groups. Due to the impact of structural racism on the labor market, people of color have much higher unemp rates than white workers. For example, the unemp rate is currently 5.8% for Black workers, 3.1% for white workers. 8/
— Heidi Shierholz (@hshierholz) October 7, 2022
And that’s because, unlike with the Great Recession, Congress did what was needed to spur a robust recovery this time around (namely, CARES and ARPA). And no, those relief and recovery packages are not to blame for inflation. 10/ https://t.co/80YTugXRdp
— Heidi Shierholz (@hshierholz) October 7, 2022
Excellent thread on today’s jobs numbers https://t.co/R7pzfACYUG
— Heidi Shierholz (@hshierholz) October 7, 2022
What to Watch on Jobs Day: Signs of life in stalled public-sector employment?
Over the last few months, we’ve seen signs of labor market cooling (though from a very strong base): the historic decline in job openings in August; moderating wage growth; and employment losses in interest-rate-sensitive jobs.
Private-sector employment rebounded fantastically following the pandemic recession because Congress made fiscal investments at the scale of the problem, and employment in the private sector exceeded pre-pandemic levels by July 2022. While the recovery continues to chug along, with rising labor force participation and prime-age employment-to-population ratio approaching pre-pandemic levels, the one sector that has failed to recover and has actually stalled for much of this year is state and local government employment.
In a year of tremendous legislative gains for California workers, Governor Newsom was wrong to veto a bill to protect 300,000 migrant workers
California’s Governor Gavin Newsom deserves credit and praise for signing into law a number of bills that will improve the lives of workers over the past few weeks. He signed legislation that will expand paid family leave, improve wages and working conditions in the fast food industry, and protect the right to organize for California’s farmworkers. Unfortunately, however, Gov. Newsom vetoed AB 364, a bill that would protect 300,000 temporary migrant workers.
Last month, I published an analysis of the components of AB 364 and its positive impact if it became law, including creating a system of transparency and accountability to prevent fraud and exploitation committed against migrant workers who are vulnerable to abuses by international labor recruiters. The abuses often include wage theft, debt bondage, and human trafficking of the migrant workers recruited to work in California through temporary work visa programs. AB 364 was introduced to combat those abuses in California, the biggest host state for migrants working with temporary visas—with a rapidly increasing population.
Below, I’ll discuss Gov. Newsom’s veto of AB 364 and critique the reasoning behind it.
Job openings fell while net job growth remained strong in August
Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for August. Read the full Twitter thread here.
Other topline indicators in the #JOLTS report saw little to no change in August. The hires rate was unchanged as separations ticked up slightly, due in part to a mild increase in the layoffs and discharges rate while the quits rate held steady. pic.twitter.com/X1XvupoAZX
— Elise Gould (@eliselgould) October 4, 2022
While quits rose in accommodations and food services, all sectors—including that one—experienced greater hires than quits in August. Hiring continues to outpace quits in every major sector as workers seek and find new jobs. pic.twitter.com/kKGxmVf1AF
— Elise Gould (@eliselgould) October 4, 2022
The drop in job openings is the big story today, but remember that we’ve already seen the data on net job growth for August and it was strong, with 315,000 jobs added and an increase in labor force participation.https://t.co/wC7Ev51Lkt
— Elise Gould (@eliselgould) October 4, 2022
As always, these surveys exhibit a fair amount of month to month volatility, but @hshierholz puts today’s data in context and shows just how much churn has come down since their peak levels of openings, hires, and quits in the pandemic labor market.https://t.co/M9Q0QfH8Q8
— Elise Gould (@eliselgould) October 4, 2022
Overtime pay will help, not hurt, New York’s farms
This op-ed was originally published in the Times Union.
Farm workers have long demanded overtime pay that kicks in after working 40 hours a week, just like other workers get. This year’s state budget included—at Gov. Kathy Hochul’s urging—a subsidy that will compensate farm owners for 100 percent of the cost of paying overtime, plus a little more to cover whatever extra is involved. Yet, farm owners are still resisting.
They’re wrong to do so.
Over 60% of low-wage workers still don’t have access to paid sick days on the job
The pandemic highlighted vast inequalities in the United States, especially in the U.S. labor market. Striking disparities were magnified in who could work from home and who had to go into work in person, who was able to keep their job and who suffered from lost work hours or employment altogether, who had health insurance to seek care when they needed it and who didn’t, and who had the ability to take paid sick days to stay home when sick, get vaccinated, or take care of loved ones and who did not. Yesterday, the latest data on employer benefits was released by the Bureau of Labor Statistics. Stark inequalities persist in access to workplace benefits. One that hits hard is the inability of over 60% of the lowest-wage workers in the U.S. to be able to earn paid sick days to care for themselves or family members.
Figure A below shows access to paid sick days is vastly unequal: Workers at the bottom are disproportionately denied this important security. The highest-wage workers (top 10%) are two and a half times as likely to have access to paid sick leave as the lowest-paid workers (bottom 10%). Whereas 96% of the highest-wage workers had access to paid sick days, only 38% of the lowest-paid workers are able to earn paid sick days.
Child Tax Credit expansions were instrumental in reducing poverty rates to historic lows in 2021
Government policies enacted in the wake of the pandemic have proven critical for reducing child poverty in the United States. Census Bureau data released last week showed that government social programs kept tens of millions of people out of poverty in 2021.
Child poverty reached its lowest level on record, as calculated by the Supplemental Poverty Measure (a measure that includes both cash and noncash benefits). This new historic low is largely thanks to the expanded Child Tax Credit (CTC), a key component of the 2021 American Rescue Plan (ARP) that has since expired. Without additional action by Congress to renew the expanded Child Tax Credit, we should expect higher child poverty in future years.
Let’s start with the outstanding role the Child Tax Credit played in reducing child poverty. The Child Tax Credit is a payment to support families raising children under 17 years of age of up to $2,000 per qualifying child. The 2021 ARP expanded the credit to increase the level of earnings to families receiving the credit (up to $3,600 per child under age 6) and to make the credit more widely available and fully refundable.