This morning’s jobs report from the Bureau of Labor Statistics showed that payroll employment came in at 211,000 jobs in April. March’s disappointing number, meanwhile, was revised further downward—however, there’s every reason to believe that this was a blip in an economy that is otherwise inching towards full employment. The unemployment rate in April ticked down to 4.4 percent, partly due to a slowdown in the number of workers (re)joining the labor force.
Wages grew a disappointing 2.5 percent from this time last year. In a healthy economy we would expect to see wages growing at 3.5–4 percent—which would be in line with productivity plus the Federal Reserve’s target inflation rate. We need to see this level of wage growth for a sustained period of time before the Fed should raise rates, and it’s clear we are not there yet.
Importantly, the topline numbers don’t reflect everyone’s experience in the labor market. Young workers and workers of color, for example, are still experiencing a weak labor market. For the benefits of a growing economy to reach every community, the labor market has to be allowed to tighten up further so that employers are competing for workers and not the other way around. This means that, most importantly, the Fed needs to keep its foot off the brakes.
At this point, we expect the recovery to continue on its slow but steady course. To show how each month’s data compare to this baseline, EPI’s autopilot tracker examines key measures in the labor market and where we expect them to go without major changes in policy. It’s important to keep this in mind when attributing credit (or blame) for any deviations from this pre-existing trend in future years. Policies such as the health care proposal that just passed the House yesterday could easily knock us off course. If enacted, the health care bill could cost the economy 1.8 million jobs by 2022. Today’s numbers may be solid, but won’t put a dent in losses like those.