What to Watch on Jobs Day: Wringing out every last bit of slack in the labor market
Two weeks ago, EPI released a paper by Estelle Sommeiller and Mark Price detailing, county-by-county, the rise in income inequality since the 1970s. Since the Great Recession, the top 1 percent of families have captured 41.8 percent of all income growth in the United States—and this disproportionate hoarding of economic growth is not unique to East Coast metropolises and Silicon Valley. All across the country, downward pressure on wages and incomes for most Americans has limited their ability to benefit from a growing economic pie. A decline in unionization and other deliberate policy choices that have reduced typical workers’ leverage and bargaining power in the labor market have contributed to these worrying trends.
Nonetheless, some experts still question why today’s relatively tighter economy isn’t bringing benefits to workers in the form of increased wages, given that we’ve seen relatively low unemployment rates over the course of the past two years—below 4.5 percent unemployment since March of last year. Josh Bivens reiterated this week EPI’s consistent stance that, “weak wage growth should make us think that by definition there is still slack in the labor market, and this might mean rethinking just how low unemployment can go.” Given this reality, policymakers (including the Fed) should stop attempting to slow the economy and allow the labor market to keep tightening, until there is consistent evidence that the benefits of a strong economy are being shared with a wide swath of the workforce. This includes many women of color who face pay gaps so large that they typically would need to work through the third or fourth quarter of another year just to earn as much as the average white man earned during the previous year. For black women, that date is next Tuesday, August 7.
In last month’s jobs report, we saw the unemployment rate tick up from 3.8 to 4.0, for positive reasons. The rise was accompanied by an increase in labor force entrants, suggesting workers are feeling optimistic about the jobs market and sidelined workers are indeed still being drawn back into the labor force. Looking at today’s prime-age employment-to-population ratio, which is still below the peaks of the last two business cycles, this is less surprising. As it has for most of the past several years, the low unemployment rate looks to be potentially overstating the strength of the labor market.
Tomorrow morning, we will continue to look at the unemployment rate, given its recent volatility, but we will also be watching nominal wage growth and the prime-age employment-to-population ratio for evidence that the economy continues to move closer to full employment.