January’s jobs report was so good that The Atlantic declared it to be ‘without a blemish.’ Job creation remained strong and wages grew as well. I agree that there was a lot to like about it, but it also strikes me that the enthusiasm it’s generated is a bit unsettling because it shows me how far our expectations have been diminished.
At first glance, job growth looks quite torrid. The New York Times noted that “Since Nov. 1, employers have hired more than one million new workers, the best performance over a three-month period since 1997.” This sounds a bit better than it is: we need to keep in mind that there are also a lot more Americans of working age now than there were in the 1990s, so we need to generate more jobs just to hold steady.
To see this, I used FRED to graph monthly job growth as a percentage of the working age US population:
This graph shows a steady and encouraging upward trend since the end of the recession, but it also clearly shows that the rate of job creation has been well below what we experienced during the non-recession years of the 1980s and 90s.
And even though the jobs news is good and getting better, labor force participation remains quite low by historical standards, and has been generally declining even since the end of the great recession:
This decline seems to have leveled off over the past year, but there’s not much evidence yet that it’s reversing itself.
The more underwhelming trend is that of wage growth. Here’s year-over-year wage growth for the past few years:
Here again, we see an uptick over the past year, but only a small one.
Data for front line workers goes back a bit farther, and shows that wage growth is significantly lower than it’s been in the past. These workers have also seen a pretty sharp wage growth decline over the past few months:
So while the January employment news is unquestionably good, there’s still a lot of room for it to get better. When I look at the participation and wage growth rates, I get the impression there’s still a lot of slack in the labor force.