Tags: Irwin | wage | job | participation

NYT's Irwin: Slow Wage Growth, Weak Labor Participation Dull Jobs Report

By    |   Friday, 06 March 2015 11:33 AM

While many economists are focusing on the strong elements of the February employment numbers, New York Times columnist Neil Irwin notes that in reality they're a mixed bag.

"The American job market has truly, really, finally, unquestionably shifted into a higher gear," he writes.

"On one hand, the results on job creation and the unemployment rate were about as good as one might hope for," Irwin explains.

The unemployment rate slipped to an almost-seven-year low of 5.5 percent. And non-farm payrolls rose 295,000, representing the 12th straight month with a gain of at least 200,000. That's the longest such streak since 1995.

But, "on the other hand, the lack of progress on wages and lack of progress in pulling people into the labor force give plenty of ammunition to those who believe that there remains plenty of slack in the labor market," Irwin notes.

Average hourly wages rose only 2 percent in the 12 months through February. And the labor participation rate totaled only 62.8 percent last month, barely above the 37-year low 62.7 percent.

"This all creates an interesting puzzle for the Federal Reserve as it tries to gauge when to raise interest rates."

Former Federal Reserve Chairman Alan Greenspan sees a problem with the economy as a whole. The growth rate stands 1 to 2 percentage points below potential, thanks to sluggish productivity, he tells CNBC.

GDP expanded 2.4 percent last year, and productivity shrank an annualized 2.2 percent in the fourth quarter.

"We have zero productivity growth in the last couple of years," Greenspan notes. "Productivity growth almost exactly percentage point to percentage point shows up in the GDP figures, slightly adjusted for the non-business sector. . . . If you don't get productivity right, your economy is in trouble."

On another economic issue, central banks around the world are concerned with their countries' low inflation rates, mounting massive easing programs to push inflation back up.

In the United States, the Federal Reserve has an inflation target of 2 percent, but its favored inflation measure climbed only 0.2 percent for the 12 months through January.

Still, there is no clear evidence that low inflation causes harm, Harvard economist Martin Feldstein argues in an article for Project Syndicate.

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While many economists are focusing on the strong elements of the February employment numbers, New York Times columnist Neil Irwin notes that in reality they're a mixed bag.
Irwin, wage, job, participation
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2015-33-06
Friday, 06 March 2015 11:33 AM
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