With all eyes glued to Friday’s payrolls report, we thought it worth reiterating some ‘facts’ about US employment data. As ECRI notes, the sustained decline in the official jobless rate – now approaching the Fed’s estimate of “full employment” – is a misleading indicator of labor market slack. The data shows thatthe so-called jobs recovery has been spearheaded by cheap labor, with job gains going disproportionately to the least educated — and lowest-paid — workers.
Indeed, the stagnation in nominal wage growth is consistent with the weakness in the employment/population (E/P) ratio. That said, even the E/P ratio may be overstating the health of the jobs market.
After dropping to three-decade lows in the wake of the Great Recession, the E/P ratio, has barely improved since the fall of 2013, reversing only about one-fifth of its decline from its pre-recession highs. Furthermore – as a breakdown of the E/P ratio by education level shows –this modest improvement is illusory.