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Westlake Legal Group > Posts tagged "wages"

Ben Brittain: Get Brexit Done and innovate like Israel

Ben Brittain is a Policy and Data Analyst for a regional economic institute. 

The Conservatives were gifted their ‘stonking majority’ by deprived constituencies that are far removed from the growth and economic power of London. The UK is a tale of two economic nations – a wealthy and highly productive London and South-East, and everywhere else, where gross value added more resembles former communist states. It was in these former mining and industrial heartlands of the Midlands and the North where working-class people lent their vote to the Conservatives to ‘get Brexit done’.

The challenge for this new government is to make the economy one whole, bridging the productivity and wage gap between London and the periphery towns of city-regions. The government will want to reward the North and Midlands for their support at the polls. But getting Brexit done is only one step. The next is to embark on a long process of economic revival in these regions, drive agglomeration within cities through transport infrastructure and skills investment.

The Government has the opportunity to level-up productivity right across the whole UK. For that, we must not look not to Silicon Valley and seek to replicate it on the Tyne – but instead look to Israel.

Today, Israel is considered an innovation superpower, with more companies listed on the NASDAQ than any other country except the United States. The Israeli success in innovative industries, such as ICT, is based on an R&D-intensive, novel-product-based, export-oriented business model. One that the UK should adopt to create a post-Brexit, R&D-heavy, exporting economy.

Israel is a hot-bed of ground-breaking technology companies such as Waze and the autonomous driving company, Mobileye, which has been snapped up by Intel for $15.3 billion. These large dominant companies are an exporting successes, but large innovative companies have to start somewhere.

Israel’s success is driven by its impressive start-up culture, and this start-up friendly ecosystem is actively fuelling an innovation economy. Israel started more than 10,000 companies between 1999 and 2014, with 2.6 per cent of these start-ups creating revenues of more than $100 million. Their success is down to reform-oriented policy makers driving change in the public sector, embedding innovation, unafraid of the role of the state as a friend to free-markets and individuals that want to start an enterprise.

The UK needs to embed five elements within its future growth framework to drive innovation. These are: support for start-ups; a substantial growth in the training of scientists and engineers; empower research-oriented civic universities and drive commercialisation within universities, expand access to venture capital, and utilise the strength of government and big-data in regional industrial strategies. All of these interact with each other to drive the process from invention to innovation.

The UK has an unrivalled higher education system that is ready to plug-in to regional economies and drive sector specialisations. To achieve this, BEIS should restart the work of the Smart Specialisation Hub and bring it in-house, to further understand how productivity is evolving in regional firms. Businesses are best placed to lead in the identification of new opportunities for growth, and many regions are already developing highly-productive sector clusters, which should not be hindered by central government imposing their own industry preferences. Instead, local industrial strategies should identify current productivity strengths and seek to implement necessary supportive interventions and create the correct ecosystem for their growth.

A culture of people, business and universities fully attuned to research and development is required, as is leveraging long-term private sector commitment. Regions should focus on what they are good at – such as the automotive industry in the West Midlands – prioritise research and innovation investment in a competitive environment, and implement policies that are strategic, based on a shared vision for regional innovation and development (such as the development of UK’s first Tesla-style battery gigafactory in the West Midlands which will build on current agglomeration).

Creating dynamic and innovative clusters in regions previously neglected and cut-off from London’s success will ensure the success of Brexit is the success of Wales, the North and the Midlands. If there are greater opportunities for high-skilled, well-paying work in innovative companies, focused on exporting, catalysed and fuelled by free-ports across the region, in industries such as space, AI, life-sciences, health and clean energy, then London will no longer suck the life out of those regions. More local residents will have better paid jobs, with more disposable income to spend in local high-streets, meaning the physicality of neglected towns in places such as Darlington and Walsall can be overcome.

The nation could be one economic success story; a real One Nation Toryism. To do that the Government will need to get Brexit done and Innovate like Israel.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Robert Halfon: For years, I’ve urged that the Conservatives become a Workers Party. Now it is one.

Robert Halfon is MP for Harlow.

It feels like I’ve woken up from a dream. Not a White Christmas, but a sea of blue-collar, spanning the length and breadth of the country, on the electoral map. For many years as MP, I’ve been campaigning for us to be the “Workers’ Party” – the representatives of blue-collar men and women up and down the country. In Essex, we use the term, “white-van conservatism”.

It is extraordinary to think that this dream has been realised by the election of MPs from all over the country, from Bishop Auckland, to my own constituency of Harlow.

Of course, the narrative from the Corbynites is that their catastrophic performance is because of Brexit. But, if you look at long-term trends, Labour have been losing the vote of working people for a number of years. The Labour movement is seen as an enemy of aspiration. In my own constituency, the Labour vote has not veered from 30 to 38 percent since 2010. Having said that, the results this time around were remarkable.

We have a real chance to fundamentally change our Party for the better. As the Prime Minister said, many people have lent us their vote, and they won’t be so generous next time if we get it wrong.

The Conservative Party must take this opportunity to become the true Workers’ Party.

That means, first, being incredibly careful with our narrative and language, and ensuring that we’re seen as the party of the ladder of opportunity and the safety net.

We should be modest, humble and kind in all our dealings with the public. Real thought and care about our language must be taken at all times, but particularly when we face the media, to ensure that Tories don’t come over as heartless or lacking emotional intelligence. Too often, we’ve allowed ourselves to be seen as out of touch and not on the side of people who are struggling. Each of us has a role to play, individually, to change this perception.

Second, let us show that we Conservatives have a real passion for our public services and are just as proud of increased funding for the NHS – as we are of the necessary tax breaks for small businesses – which we know increases investment and employment opportunities.

Third, we have to be relentless about cutting the cost of living. Lowering taxes is a moral good. We must convey that it is not all about helping rich people in the city or tycoons. This means, as the Manifesto pledged, focusing on cutting taxes for the lower paid by continuing to reduce income tax and making increases to the National Living wage a priority.

But we shouldn’t just cut taxes for lower earners, we need to ensure they know about it. On wage slips, for example, the Treasury should set out exactly how much the Government is saving taxpayers. The wage slip should read: “Your tax bill would normally be £X, but the Conservative Government has discounted it to £Y, saving you £Z.”

A simple, practical mechanism to ensure that workers on lower incomes know that it is Conservatives that are cutting their tax bill.

So, too, should the fuel duty freeze continue – again, as mentioned by the Prime Minister in the campaign. More action needs to be taken to improve Universal Credit so that its purpose of eliminating the poverty trap finally becomes a reality.

Fourth, many working people in communities that have now voted Conservative are passionate about apprenticeship opportunities for their children. Our vocational and technical education reforms should be at the forefront of policy for our Education Secretary. Every single young person should have the offer of a high-quality apprenticeship – right through from Level 2, up to degree-level.  Conservatives should aim for 50 per cent of students to take up degree apprenticeships.

Conservatives must come good on school funding and continue to provide as much parental choice of schools as possible and do everything to improve standards of reading and numeracy. Skills, Standards, Social Justice and Support for the profession should be the four s’s mantra of our education policy.

Fifth, it is high time we deal with the lack of housing in this country. We have to be bold and build hundreds of thousands more houses, recognising that 90 percent of land is not yet built on. It cannot just be about schemes like Right to Buy and Help to Buy, great though they are, but also about real affordable housing that people can rent.

Sixth and finally, whatever happens, as well as being the Workers’ Party, Tories must be a movement for social justice, too. Millions of our countrymen and women struggle everyday, whether it is a parent waiting for 39 weeks for their child to be diagnosed with a mental health issue, or people living in ghetto-type social housing, or individuals being sucked into a spiral of dependency on addictive drugs. We should do more to combat abusive relationships and domestic violence, too.

Conservatives must be the Party for these people as much as those who are already climbing the ladder of opportunity. Our job is to bring people to the ladder, to help them climb up and be ready with a safety net should they fall. The Party that enables and strengthens social capital, as much as economic capital.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Mixed bag from BLS: Unemployment and new jobs both decline in September

Westlake Legal Group trump-shrug Mixed bag from BLS: Unemployment and new jobs both decline in September wages Unemployment Trade War The Blog jobs report Economy donald trump China

Now has the summer of our middling economic content extended into the autumn. Job creation in September continued its slowing pace, only adding 136,000 jobs to the US economy, while wages stagnated. The good news is that the unemployment rate dropped to 3.5%, a change made even better since it isn’t tied to any exodus from the workforce:

The unemployment rate declined to 3.5 percent in September, and total nonfarm payroll employment rose by 136,000, the U.S. Bureau of Labor Statistics reported today. Employment in health care and in professional and business services continued to trend up. …

In September, the unemployment rate declined by 0.2 percentage point to 3.5 percent. The last time the rate was this low was in December 1969, when it also was 3.5 percent. Over the month, the number of unemployed persons decreased by 275,000 to 5.8 million. …

The labor force participation rate held at 63.2 percent in September. The employment-population ratio, at 61.0 percent, was little changed over the month but was up by 0.6 percentage point over the year.

The last time the unemployment rate hit 3.5% was when Richard Nixon was in his first year as president, CBS’ Mark Knoller observes. That’s unquestionably good news, as is the fact that it didn’t take a drop in the workforce numbers to achieve it. The Household survey does have some odd anomalies that might have contributed to it, such as a drop in 275K in the unemployed and an addition of 391K in the employed categories, which should have needed an additional 400,000 jobs or so to accomplish from the Establishment survey. However, it’s the civilian labor force number alone that provides the denominator for the U-3 measurement, and that looks relatively stable at +117,000.

The BLS provided more good news in the revisions, which added 45,000 jobs to the previous two months. As their chart shows, however, that’s not enough to move any of the last six months above the maintenance level for keeping up with population growth:

Westlake Legal Group bls-chart-2019-09 Mixed bag from BLS: Unemployment and new jobs both decline in September wages Unemployment Trade War The Blog jobs report Economy donald trump China

Job creation has been slowing since late last year, which makes the warning signs on wages look more ominous. Hourly earnings dropped slightly in September and hours didn’t expand, suggesting that the market has at least temporarily become static:

In September, average hourly earnings for all employees on private nonfarm payrolls, at $28.09, were little changed (-1 cent), after rising by 11 cents in August. Over the past 12 months, average hourly earnings have increased by 2.9 percent. In September, average hourly earnings of private-sector production and nonsupervisory employees rose by 4 cents to $23.65. (See tables B-3 and B-8.)

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in September. In manufacturing, the average workweek and overtime remained at 40.5 hours and 3.2 hours, respectively. The average workweek of private-sector production and nonsupervisory employees held at 33.6 hours. (See tables B-2 and B-7.)

That annual wage-growth number is the lowest in 14 months, CNBC noted. Until now, the continued growth in wages appeared to indicate a healthy job market. This is only one month, but it’s still a warning about what the impact of a low-job-creation environment will eventually produce. The Trump administration needs that wage growth to keep pace in order to maintain consumer confidence and its political support.

CNBC’s Jeff Cox reported the results as a seriously mixed bag for the economy:

The jobless rate dropped 0.2 percentage points to 3.5%, matching a level it last saw in December 1969. A more encompassing measure that includes discouraged workers and the underemployed also fell, declining 0.3 percent points to 6.9%, matching its lowest in nearly 19 years and just off the all-time low of 6.8%.

Also, the jobless rate for Hispanics also hit a new record low, while the level for African Americans maintained its lowest ever.

At the same time, the economy saw another sluggish month of growth. The nonfarm payrolls count missed the 145,000 estimate from economists surveyed by Dow Jones; the expectation on the jobless rate was to hold steady at 3.7%.

Wages also were a disappointment, with average hourly earnings little changed over the month and up just 2.9% for the year, the lowest increase since July 2018.

The AP’s Christopher Rugaber writes that this sense of slowing down has already begun to impact consumer behavior:

The job market is the economy’s main bulwark. As long as hiring is solid enough to keep the unemployment rate from rising, most Americans will likely remain confident enough to spend, offsetting other drags and propelling the economy forward.

But a slump in hiring or a rise in the unemployment rate in coming months could discourage consumers from spending as freely as they otherwise might during the holiday shopping season.

Consumers are still mostly optimistic, and their spending has kept the economy afloat this year. But they may be growing more cautious. Consumer confidence dropped sharply in September, according to the Conference Board, a business research group, although it remains at a high level.

Americans also reined in their spending in August after several months of healthy gains. The 0.1% increase in consumer spending that month was the weakest in six months.

At some point, Donald Trump may have to decide which is more important to his re-election chances — winning a long trade war with China or a revitalized job-creation market with a jump in wages. That point is rapidly approaching.

The post Mixed bag from BLS: Unemployment and new jobs both decline in September appeared first on Hot Air.

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Ryan Bourne: To help grow prosperity, let’s focus on people and not places – such as towns

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Stian Westlake describes it as the “Strange Death of Tory Economic Thinking”. Conservatives have ceased telling an economic story about why they should govern, and how. Sure, there’s still the odd infrastructure announcement, or tax change. But, since Theresa May became leader, the governing party has shirked articulating a grand economic narrative for its actions.

This is striking and problematic. From Macmillan to Thatcherism to deficit reduction, the party’s success has coincided with having clear economic agendas, gaining credibility for taking tough decisions in delivering a shared goal. But, arguably, deficit reduction masked a secular decline in interest in economics. David Cameron and George Osborne, remember, wanted to move on to social and environmental issues until the financial crisis and its aftermath slapped them in the face.

Now, with the deficit down, economics is in the back seat. Fiscal events are low key and economic advisors back room. To the extent the dismal science is discussed, it’s as a means to other ends, or a genuflect to “Karaoke Thatcherism.”

In short, I think Westlake is right: the Tories do not have an economic story and, post-Brexit, it would be desirable if they did. So we should thank both him and Sam Bowman (formerly of the Adam Smith Institute), who have attempted to fill the vacuum. In a rich and interesting new paper, the pair set out to diagnose our key economic ailments and develop a Conservative-friendly narrative and policy platform to ameliorate them, even suggesting reform of the Right’s institutions and think-tanks in pursuit of the goals.

Such an effort deserves to be taken seriously, though not everyone will agree with their starting premises. It is assumed, for example, that Conservatives believe in markets and want to maintain fiscal discipline, which bridles against recent musings from Onward or thinkers such as David Skelton.

But, again, the key economic problem they identify is incontrovertible: poor economic growth. Weak productivity improvements since the crash have been both politically and economically toxic, lowering wages, investment returns, and necessitating more austerity to get the public finances in structural order. And the nature of modern innovation, arising from clusters and intangible assets, means that growth that is experienced isn’t always broadly shared.

Their agenda’s aim then is to achieve both concurrently: maximize the potential of the economy by taking policy steps on planning, tax policy, infrastructure, and devolution, to increase investment levels, allow successful cities and towns to grow, and to connect “left behind” places to local growth spots through good infrastructure. None of their ideas are crazy. Indeed, I would support the vast majority of them.

And yet, something bothered me about their narrative. In line with the current zeitgeist, they too discuss “places” and their potential, as if towns and cities are autonomous beings. My fear is this focus – shared by those who want to regenerate “left behind” areas – creates unrealistic expectations about what policies can achieve in a way that undermines a pro-market agenda. Importantly, it warps what we should really care about: “left behind” people, not left behind places.

A people-centred narrative recognises that just as firms fail in the face of changing consumer demands and global trends, so high streets, towns, cities, and even regions will shrink too. As Tim Leunig once said, coastal
and river cities that developed and thrived in a heavy manufacturing, maritime nineteenth century world might not be best placed to flourish in a service sector era of air and rail.

A true pro-market policy agenda would admit -and that’s ok. Or at least, it should be, provided we understand that raising growth and sharing prosperity requires adaptation, not regeneration. That means removing barriers for people either to move to new opportunities or have control to adapt their situations to ever-changing circumstances. This might sound Tebbit-like (“get on your bike”), but really it’s just saying policy must work with market signals, not against them.

Today though, interventions actively work in a sort of one-two-three punch against inclusive growth and adjustment. First, we constrain the growth of flourishing cities. Tight land use planning laws around London, Oxford, and Cambridge contribute to very high rents and house prices, and prevent these places benefiting from growing to obtain thicker agglomeration effects.

This contributes to the “left behind” scandal, but not in the way people imagine. When rents and house prices are higher in London and the South East and we subsidse home ownership or council housing elsewhere, it’s low productivity workers from poor regions that find it most difficult to move given housing cost differentials. As a result, they get locked into poorer cities and towns that would otherwise shrink further. That’s why Burnley, Hull and Stoke are the most egalitarian cities in the country, whereas prosperous London, Cambridge and Oxford are the most unequal, even as inequality between regions has intensified.

Having restricted people’s mobility through bad housing policy, we then impose one-size-fits-all solutions and subsidies which dampen market signals further. National minimum wages, fiscal transfers, national pay bargaining, and more, might be designed to alleviate hardship, but they deter poorer regions from attracting new businesses and industries by trading on their market cost advantages. Then, to top that off, we compound the problem further by centralising tax and spending powers, preventing localities from prioritising their spending and revenue streams to their own economic needs.

Now, as it happens, Bowman and Westlake’s policy agenda is perfectly compatible with assisting  “people” rather than “places,” precisely because it’s market-based. They advocate planning liberalisation, a flexible right to buy, and stamp duty, all of which would improve labour mobility. They prioritise infrastructure spending based on benefit-cost ratios, making investments more profitable with sensible tax changes, and devolving more transport power to regions and localities. All, again, will help facilitate areas adapting to changed economic conditions, rather than reviving Labour’s failed top-down regeneration attempts.

But pitching this as a city and town agenda still risks creating the false impression that the net gains from “creative destruction” nevertheless can be achieved without the destruction, and that all places can thrive in the right policy environment.

One can understand why they framed it in this way. Their aim is to persuade the party and its MPs of their platform. Anti-market commentators would call them fatalistic and “abandoning” places if they acknowledged the downside, as if facilitating more free choice amounts to design.

Successful past Tory economic narratives, though, willingly acknowledged hard truths. Deficit reduction entailed tough choices to curb spending. Thatcherism entailed making the case for letting inefficient industries fail. If a new Tory vision is serious about raising productivity growth and spreading opportunity for people, it will have to confront the inevitable market-based adaptation for some places.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Neil O’Brien: Corbynomics – and why it means that your house, business and savings don’t really belong to you,

Neil O’Brien is MP for Market Harborough.

What is Corbynomics? It goes without saying that it’s a much more extreme economic programme than Labour have ever had before. And that government will spend, tax and borrow more. But Labour have a lot more damaging, half-baked and dangerous ideas.

No-one is thinking about them at the moment, but the scary thing is that within weeks these ideas could be affecting your house, your pension and your job.

For me, the most frustrating thing is that Labour have identified various important issues, but their proposed “solutions” would make matters worse. Let’s look at a couple of examples.

Seizing 10 per cent of all large companies’ shares

Lots of people, including me, worry that current corporate structures create pressures that make managers behave in a short-termist way, squeezing investment to hit short term profit targets and dragging down productivity growth. I’m concerned that publicly quoted firms are beholden to increasingly transient shareholders, interested in immediate returns. They certainly invest far less than privately owned firms who can take a longer-term view.

But my answer to this would be to change the tax treatment of investment, and increase capital allowances so that there’s no disincentive to invest.

Labour’s answer, in contrast, is to forcibly transfer 10 per cent of all companies shares to create a sort of employee-ownership-at-gunpoint.

This is a terrible idea, which would make investment into the UK dry up overnight. After all, if government can steal ten per cent of your shares, what’s to stop them coming back for the rest? Labour protest that the shares are not being stolen – just given to the workers. But that’s a lie, as they also propose that a Labour-run Treasury would take the great majority of the dividends that those shares attract. At the moment, these are owned by savings and pension funds – so the money is ultimately coming out of your pocket.

The total value of the shares stolen by government would be around £300 billion, according to the Financial Times. For comparison, raising the basic rate of tax by one per cent raises £4.5 billion a year, so you can see what a vast tax grab this would be.

Forcing people to sell their properties at a price set by government, and control rents

There are major issues about the balance of rented and owner-occupied property in Britain. We had a long period when the number of properties being moved into the rent-to-buy sector was outstripping the number built, meaning owner occupation fell dramatically. Between 1996 and 2016, the home ownership rate among middle income people aged 25-34 fell from 65 per cent to 27 per cent.

However, in 2015 the Conservative Government reformed the tax treatment of rent to buy and second homes, and in the years since we have seen homeownership rebounding upwards, with both ownership and the rented sector growing in a more balanced way. There are lots more things we could do to grow home ownership.

Corbynista Labour doesn’t really believe in home ownership. They are nostalgic for the world of the 1970s, where around two thirds of households in places like Islington lived in social housing. But they know ownership is popular.
So they have announced the “private sector right to buy”. This will give private tenants the right to make their landlords sell their properties to them at a discount.

In an interview last week, John McDonnell made it clear that government would set the price: “You’d want to establish what is a reasonable price, you can establish that and then that becomes the right to buy,” he said. “You (the government) set the criteria. I don’t think it’s complicated.”

It’s not complicated. But it is deeply unfair. It would be a retrospective raid on people’s assets. People, including some who are not so rich, have invested in property under certain rules, and would have their savings ripped off them, while other people who invested their money in other things would not. This is arbitrary and unreasonable and would I’m sure be challenged in the courts.

Labour would also set rental prices, promising in a recent document that “There should be a cap on annual permissible rent increases, at no more than the rate of wage inflation or consumer price inflation (whichever is lower).”

This is unworkable or will lead to under investment in rented properties. Why spend lots doing up a flat if you can’t charge more for an improved property? We would quickly be heading back to the 1970s, when there wasn’t enough rented accommodation to go round, and conditions were squalid because of rent controls.

Sectoral wage bargaining

With the National Living Wage, the Conservatives have introduced one of the highest minimum wages in the world. For the lowest paid, the National Living Wage plus the cuts in taxes for lower paid people mean that they take home £4,500 more than they did under the last Labour Government – while employment has soared to a record high. We should be really proud of our record.

However, the National Living Wage is still set by an independent body, and as percentage of average pay in the market, so there is a sensible link to what businesses can afford without sacking people.

In contrast, under Labour politicians would just set rates directly. Labour have also pledged to “roll out sectoral collective bargaining”. Labour said it would “fix the going rate” in each industry and “set fair conditions” for the sector. This would represent an end to the system whereby unions negotiate company by company and, instead, give them power effectively to set national standards on pay and conditions. A new government unit would work with unions to bring firms into line.

This means that if politicians or trade unions decide your business is part of a particular “sector” (a pretty subjective question) then you would be in line for a change in wages which your business might simply be unable to afford. The scope for union bullying and endless court cases and demarcation disputes is obvious. In the car industry, wages are high, so a sectoral wage would be high. If I make plastic bits for the car industry but also other industries, is my business in or out of the automotive sector?

Rebecca Long Bailey has also said that “Labour will also legislate to reduce pay inequality by introducing an Excessive Pay Levy on companies with staff on very high pay.” There is no detail on what the rules will be, but the idea of having wages directly controlled by Jeremy Corbyn is likely to deter inward investment.

What do these ideas have in common?

When New Labour left office, a million people had been thrown on the dole, we’d had the deepest recession since the second world war and government was borrowing more than at any time in our whole peacetime history. In the final year alone, they borrowed £7,900 for every family in Britain.

And that was New Labour. Imaging what the country would look like after Corbyn and McDonnell.

Where Corbyn’s ideas really differ from previous Labour leaders is that he doesn’t really believe in the rule of law. Your house, your business, your savings: all these things don’t really belong to you, in Corbyn’s eyes: you have them only as long as the government suffers you to have them, and they can be retrospectively taken away if he sees fit. In the week Robert Mugabe died, we’ve seen underlined just how important the rule of law is. But under Corbynomics, it would be the first casualty.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

“Really good”? Job growth slows, wages grow in August

Westlake Legal Group trump-shrug “Really good”? Job growth slows, wages grow in August wages The Blog jobs report Economy donald trump China ADP employment report

We can put the conspiracy theories to rest. After Donald Trump tweeted out “Really Good Jobs Numbers” yesterday, critics accused him of unfairly accessing the official jobs report from the BLS. The actual jobs report for August shows a third straight month of declining job growth, although it does have better news on wages:

Total nonfarm payroll employment rose by 130,000 in August, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment in federal government rose, largely reflecting the hiring of temporary workers for the 2020 Census. Notable job gains also occurred in health care and financial activities, while mining lost jobs.  …

In August, the unemployment rate was 3.7 percent for the third month in a row, and the number of unemployed persons was essentially unchanged at 6.0 million. (See table A-1.) …

The labor force participation rate edged up to 63.2 percent in August but has shown little change, on net, thus far this year. The employment-population ratio, at 60.9 percent, also edged up over the month and is up by 0.6 percentage point over the year. (See table A-1.)

Those aren’t “really good” numbers, and we haven’t had “really good” numbers for most of the year. Only one month has exceeded 200K jobs added, and that was six months earlier in February. This chart from the BLS shows the 2019 trend and the contrast to 2018’s more robust job creation:

Westlake Legal Group bls-2019-08 “Really good”? Job growth slows, wages grow in August wages The Blog jobs report Economy donald trump China ADP employment report

The 130K level barely keeps pace with population growth. It doesn’t help matters that the previous two months got revised downward in this report by 20,000 jobs combined. The three-month average is now at a mediocre 156,000 per month. It would be quite a bit lower without government hiring for the upcoming census, which accounts for 36,000 jobs in August.

On top of that, more people are going into part-time work due to a lack of full-time job opportunities:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 397,000 to 4.4 million in August; this increase follows a decline of similar magnitude in July. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

This is why friends don’t let friends rely on the ADP employment report, which was what Trump used for his “really good” assessment of job creation. ADP’s 195K projection in the private sector missed by 100,000. The ADP survey isn’t a reliable indicator of official BLS numbers, and not even a reliable indicator of their direction. It has its uses, but the wisest course of action is always to wait for the official numbers — which we can pretty much confirm Trump never saw.

It was a miss on Wall Street too, which expected to see 150,000 jobs added. However, the report does have a bright spot on wages:

The increase fell short of Wall Street estimates for 150,000, while the unemployment rate stayed at 3.7%, as expected. An alternative measure of the jobless rate, which includes discouraged and underemployed workers, increased to 7.2% from 7% in July, due mainly to a 397,000 increase in those working part-time for economic reasons.

Wage growth remained solid, with average hourly earnings increasing by 0.4% for the month and 3.2% over the year; both numbers were one-tenth of a percentage point better than expected.

Labor force participation also increased, rising to 63.2% and tying its highest level since August 2013. The total number of Americans considered employed surged by 590,000 to a record 157.9 million, according to the household survey, which is conducted separately from the headline establishment count.

The upward pressure on wages and hours is good news, but don’t forget that both are usually lagging indicators. It also might show that employers are balking at expansion out of uncertainty, using existing employees to get more work done while seeing which way the economic winds are blowing. The sharp decline in job creation in 2019 will erode that pressure to maintain higher wages if it continues for much longer.

This is not the kind of job growth that Trump needs to see going into an election year. It’s also not bad enough to deflect him from his course on China and trade, where his trade war seems to be finally paying off in negotiations with Beijing. The faster that gets resolved the better, but Trump still has some room as long as wages keep growing and jobs don’t flip over into the red with regard to population growth. That line is getting closer, though, and the White House should be getting nervous about it.

The post “Really good”? Job growth slows, wages grow in August appeared first on Hot Air.

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Cool, cool summer: 164K jobs added in July

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The labor force hit a record high, but otherwise the July jobs report was rather unspectacular. The addition of 164,000 new jobs landed almost squarely on economists’ expectations, and wages grew slightly better than expected. However, the pace of job creation remains slower than in 2018:

Total nonfarm payroll employment rose by 164,000 in July, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in professional and technical services, health care, social assistance, and financial activities. …

In July, the number of persons unemployed less than 5 weeks increased by 240,000 to 2.2 million, while the number of long-term unemployed (those jobless for 27 weeks or more) declined by 248,000 to 1.2 million. The long-term unemployed accounted for 19.2 percent of the unemployed. (See table A12.)

In July, the labor force participation rate was 63.0 percent, and the employment-population ratio was 60.7 percent. Both measures were little changed over the month and over the year. (See table A-1.)

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 363,000 in July to 4.0 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. Over the past 12 months, the number of involuntary part-time workers has declined by 604,000. (See table A-8.)

The unemployment rate stayed steady at 3.7%, but it ticked up slightly in some subcategories. The biggest jump was a 0.7% increase among Asian-Americans, followed by a 0.2% increase among Hispanic workers. Unemployment ticked up among college graduates too, although that was offset by gains among workers with high school diplomas or less. The U-6 unemployment rate fell to its lowest level in nearly 20 years to 7%, however, a good sign that the overhang from the Great Recession has finally evaporated.

The same kind of mixed signals runs through the entire report. While the pace of job creation in July surpasses that needed to keep up with population growth, it doesn’t surpass it by much. It’s a maintenance pace, not anywhere near a breakout rate suggesting sharper upward growth or much optimism by employers for such. The revisions to the previous two months also shaved off 31,000 net new jobs, making 2019 look much less impressive than last year:

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In 2018, the US economy had more than half its months at or above 200K jobs added and two near-misses. Thus far in 2019, we have only had one with one near-miss. The labor market has tightened, to be sure, which is why wage growth continues upward and why July set a new record for the size of the labor force. However, the pressure for new jobs seems to have plateaued, and that should concern the Trump administration as it heads into a re-election campaign.

CNBC’s Jeff Cox sees the glass half full:

The Labor Department reported Friday that payrolls increased 164,000 during the month, just 1,000 below the 165,000 Dow Jones forecast. This also was about the average monthly gain for the year. In 2018, the economy created 223,000 jobs a month.

Wages also continued to increase, with the 3.2% year-over-year gain topping expectations by one-tenth of a percentage point. Average weekly hours edged lower to 34.3.

Economists had expected the unemployment rate to drop to 3.6%, which would have tied a 50-year low, but an influx of 370,000 new workers to the labor force brought the participation rate up to 63%, its highest since March. The total labor force of 163.4 million is a new record. …

The report comes amid worries that the U.S. economy could slide into recession in 2020, owing to a weaker global outlook and worries over the escalating trade war with China. Federal Reserve officials voted Wednesday to cut their benchmark interest rat a quarter percentage point, citing the global slowdown as well as concerns over weak inflation.

Reuters takes the glass-half-empty approach:

U.S. job growth slowed in July and wages picked up moderately, which together with an escalation in trade tensions between the United States and China could give the Federal Reserve ammunition to cut interest rates again next month. …

The U.S.-China trade war is taking a toll on manufacturing, with production declining for two straight quarters. Business investment has also been hit, contracting in the second quarter for the first time in more than three years and contributing to holding back the economy to a 2.1% annualized growth rate. The economy grew at a 3.1% pace in the first quarter.

July payrolls marked a further deceleration in job growth from an average of 223,000 per month in 2018. Economists say it is unclear whether the loss of momentum in hiring was due to ebbing demand for labor or a shortage of qualified workers.

Still, the pace of job growth remains well above the roughly 100,000 needed per month to keep up with growth in the working-age population. The unemployment rate was unchanged at 3.7% in July.

Real wage growth continues, so it may be more of a lack of labor. With so many people jumping into the labor force now, however, that wage growth may not sustain itself for too much longer without a new round of dynamic job creation. For an administration that makes Main Street economy its calling card, the lukewarm jobs reports in 2019 should start being a big concern.

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Economy slows to 2.1% GDP, but still beats expectations; Trump: “Not bad”

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It’s not great news for the White House, but it could have been a lot worse. The US economy’s growth slowed to 2.1% in the second quarter, down a full point from Q1. However, with economists predicting a recession right around the corner, the growth is still substantial enough to look positive:

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the second quarter of 2019 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.1 percent.

The Bureau’s second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see “Source Data for the Advance Estimate” on page 2). The “second” estimate for the second quarter, based on more complete data, will be released on August 29, 2019.

The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures (PCE), federal government spending, and state and local government spending that were partly offset by negative contributions from private inventory investment, exports, nonresidential fixed investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased (table 2).

The deceleration in real GDP in the second quarter reflected downturns in inventory investment, exports, and nonresidential fixed investment. These downturns were partly offset by accelerations in PCE and federal government spending.

One point was unalloyed good news for Donald Trump. Disposable personal income leaped upward by almost 5% in Q2, the result of a tight labor market and continued economic expansion. It follows a similar jump in Q1 and is at least one factor in the best increase in consumer spending in nearly two years.

There are other glimmers of hope as well. Final sales of domestic product increased by 3.0% in Q2, which suggests that retailers burned through inventory backlogs over the last three months. If consumer spending stays high, new orders should begin to make up that difference. Yesterday’s durable-goods report showing an increase of 2.0% in June, following a -2.3% decline in May, suggests that better news is on the way. Also, exports took a big hit in Q2, dropping 5.2% while imports stayed mainly static. If that’s a one-time glitch, then Q3 should be cheerier, but that might depend on whether Trump can draw his trade wars to a close.

No other issue is more important to Trump than the economy. Despite all of the other controversies and noise around Trump, some of them created and stoked by Trump himself, none of them are as do-or-die as the economy. As long as the economy keeps growing and producing real wage increases for workers, Trump can win re-election. Any kind of slowdown makes him vulnerable, and even this 2.1% rate might raise eyebrows.

So far, though, the media is breathing sighs of relief. CNBC’s Jeff Cox notes that recession fears will likely recede now:

Growth decelerated in the second quarter, but not by as much as Wall Street thought, as tariffs and a global slowdown weighed on the U.S. economy, the Commerce Department reported Friday.

GDP increased 2.1%, down from 3.1% from the first quarter, the weakest increase since the first quarter of 2017 as President Donald Trump took office. Dow Jones estimates were for 2% growth.

However, the underlying numbers in the report seemed to take steam out of the recession fears that have been much of the talk among economists and policymakers at the Federal Reserve.

“The recession talk was always overstated,” said Michael Arone, chief investment strategist at State Street Global Advisors. “Those that were doing the Chicken Little, the sky is falling, we’re headed for recession talk were clearly early in that assessment. The economic data continue to suggest that the economy isn’t near recession, at least in the next year or so.”

Trump needs that to be more like … eighteen months. To get that, though, he’ll have to settle accounts with China and get the USMCA passed in Congress.

Update: Stock markets are sharply up as this update is being written, with investors apparently agreeing with Trump’s overall assessment:

“Not bad” is a little bit of an understatement, actually. It’s pretty good, especially in the context of the global economy. That’s the bigger anchor, especially the trade disputes that at least for one quarter hit our exports hard.

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Oh yes: Bernie Sanders’s campaign hit with … federal labor complaint

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What can one say about this?

Except that it’s the greatest day in American political history, I mean.

Am I still an atheist after reading it? I don’t know. I just. don’t. know.

Sen. Bernie Sanders’ (I-Vt.) 2020 presidential campaign has been hit with an unfair labor practice complaint alleging illegal employee interrogation and retaliation against staffers.

The July 19 complaint to the National Labor Relations Board, filed by an unnamed individual in Indiana, was posted to the agency’s website late July 22. It comes as tense negotiations between the Sanders campaign and the union representing staffers recently boiled over publicly. The Washington Post reported July 23 that unionized organizers for the campaign had won a pay raise and reached a compromise to reduce the hours of some workers.

A copy of the charge has not yet been made public, but the agency’s July 22 docket lists five potential violations of the National Labor Relations Act. The charge also alleges that the campaign unlawfully discharged an employee, modified a labor contract, and engaged in illegal discipline.

Illegal employee interrogation, eh? On the one hand, Bloomberg notes that anyone can file a complaint with the NLRB. Conceivably this could be nothing more than baseless mischief-making by a political enemy aiming to capitalize on public attention to Team Bernie’s labor troubles lately, knowing that righties like me are going to snuggle this story like a new puppy. File the complaint, generate the bad headline, and trust that no one will be paying attention when it turns out a month from now that there was nothing to it. Damage done.

But there’s also this recent quote from Bernie himself when he was asked about not paying his field organizers an (average) $15 hourly wage, which of course he believes should be the statutory minimum as a matter of national policy:

“It does bother me that people are going outside of the process and going to the media,” he said. “That is really not acceptable. It is really not what labor negotiations are about, and it’s improper.”

So management was mad at labor for leaking to the press, and now here’s a complaint claiming that managers interrogated employees illegally and even retaliated against them. Hmmm.

We’re like two days away from Bernie sending in Pinkerton goons to crack heads.

Actually, and alas, the fun we’ve been having with the Sanders campaign’s labor problems seems to be ending. Top officials reached a deal with the union this afternoon to boost the pay of field organizers to $42,000 per year in return for extending the work week from five days to six — with an important caveat:

The deal would extend the workweek from five days to six days. But it also would clarify that the expected hours worked each week would be 50. The changes would mean that if the organizers are working 50-hour weeks, then they would make an annual salary equivalent to more than $15 per hour, which Sanders has said for years should be the federal minimum. But if they work longer hours, which the union said could happen, even voluntarily, then the equivalent hourly rate could drop below that threshold.

Sounds to me like all they did here was give everyone a raise in exchange for labor agreeing to maintain the fiction that they’re only working 50 hours a week on average going forward. That solves everyone’s political problem by producing an average hourly wage greater than $15, but in reality, now that they’re coming into the office six days a week instead of five, they’re going to end up working more than 50 hours weekly “voluntarily.” They were already working an average of 60 before this dispute began, in fact. Maybe private employers could use that dodge if and when they get stuck with a national $15 hourly minimum wage. Workers get $15 an hour for their first 30 hours, say, and then the next 10-20 after that consists of “volunteering.” Sounds like a plan.

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Union to Bernie, Inc: Give us the $15 per hour you’re promising everyone else

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If you have any leftover popcorn from the Wokeback Mountain War, time to get it out. Bernie Sanders has demanded an immediate increase in the minimum wage to $15 an hour for years, and has been a persistent advocate for unions. When the union representing his campaign workers demanded that wage for Bernie’s own employees, however, the Washington Post discovers that Bernie Inc has much different ideas about wages and unions:

Unionized campaign organizers working for Sen. Bernie Sanders’s presidential effort are battling with its management, arguing that the compensation and treatment they are receiving does not meet the standards Sanders espouses in his rhetoric, according to internal communications.

Campaign field hires have demanded an annual salary they say would be equivalent to a $15-an-hour wage, which Sanders for years has said should be the federal minimum. The organizers and other employees supporting them have invoked the senator’s words and principles in making their case to campaign manager Faiz Shakir, the documents reviewed by The Washington Post show.

Sanders has made standing up for workers a central theme of his presidential campaigns — this year marching with McDonald’s employees seeking higher wages, pressing Walmart shareholders to pay workers more and showing solidarity with university personnel on strike. The independent from Vermont has proudly touted his campaign as the first presidential effort to unionize its employees, and his defense of the working class has been a signature element of his brand of democratic socialism and a rallying cry for the populist movement he claims to lead.

The Sanders campaign has been fighting this demand since May, according to the internal communications reviewed by the Washington Post. After being asked for comment, both the campaign and the union lauded the unique nature of the union-employer relationship in the campaign industry. The union bragged about the “myriad protections and benefits” accorded to members through its contract, and Team Bernie declared that their willingness to work with a union showed that Sanders is “the most pro-worker and pro-labor candidate running for president.”

All of which is arguably true, as it’s still the only presidential campaign to organize its workforce. But what about the wages? After all, Bernie wants to force all American employers to pay a base rate of $15 per hour. Is he willing to put his money where his mouth is?

So far, no, and the union plans to make people aware of the “poverty wages” being provided by that exploiter of the proletariat:

A draft letter union members earlier had prepared to send Shakir as soon as this week said that the field organizers “cannot be expected to build the largest grassroots organizing program in American history while making poverty wages. Given our campaign’s commitment to fighting for a living wage of at least $15.00 an hour, we believe it is only fair that the campaign would carry through this commitment to its own field team.”

The draft letter estimated that field organizers were working 60 hours per week at minimum, dropping their average hourly pay to less than $13. It said that “many field staffers are barely managing to survive financially, which is severely impacting our team’s productivity and morale. Some field organizers have already left the campaign as a result.”

This gets to a little deception from Team Bernie that any real employer could have warned would eventually backfire. The union contract guarantees a salary of $36,000, not a base hourly wage. (Interns get paid by the hour at $15, however.) As anyone who has transitioned from hourly to salary knows, employers like to pay salaries because they can demand more hours worked without paying for overtime. The $36K level, divided by the normal annual work hours in a year (2,080), comes to $17.31 per hour. If Bernie Sanders’ field organizers are working 60 hours a week, however, that comes to 3,12o hours in a year and drops their per-hour rate to … $11.54 per hour. These workers would literally do better working at Wal-Mart, one of Bernie’s bêtes noires.

But wait — there’s more! This hourly-to-salary dodge is well known and usually treated harshly by the National Labor Relations Board and the Department of Labor. Most employers would get called on the carpet for putting non-supervisory employees — and sometimes non-management — on salary with constant demands for overtime work. However, since Team Bernie employees set their own terms through their union representation, they may not be able to sue for back wages in the way that other employees might in the private sector for misclassifying their compensation.

Why would a union negotiate a contract for front-line employees that denied them access to legitimate overtime? This sounds like a sweatshop arrangement, not a breakthrough for political campaigns. It’s trapping their members in exploitative work conditions. Isn’t that what unionizing is supposed to prevent?

So much for the Bernie Sanders workers’ paradise. And so much for the benefits of union representation, especially when the unions have a bigger investment in the employer than the employee.

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