Friday’s jobs report—the third key piece in the government’s monthly data trifecta—underscored the worrisome asymmetry that now marks the U.S. economy.

On jobs, it was mostly good news: the economy churned out 242,000 new jobs in February, on the heels of an upwardly revised 172,000 in January and 271,000 in December, for a monthly average of 228,000 new jobs.  

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Jobs Report: Good News-Bad News?

Fri Mar 4, 2016

Friday’s jobs report—the third key piece in the government’s monthly data trifecta—underscored the worrisome asymmetry that now marks the U.S. economy.

On jobs, it was mostly good news: the economy churned out 242,000 new jobs in February, on the heels of an upwardly revised 172,000 in January and 271,000 in December, for a monthly average of 228,000 new jobs.
The nation’s unemployment rate held steady at the “full employment” level of 4.9%, same as January and the best since February 2008.

But earnings continued to be a soft spot in the monthly jobs report, with average hourly earnings for all employees on private sector nonfarm payrolls actually declining in February by 3 cents to $25.35 compared to a 12 cent increase in January.

In striking contrast to the positive jobs numbers were persistent weakening trends in national output and in the all-important productivity picture. The government reported at the end of February that U.S. real GDP growth faltered in last year’s fourth quarter, slowing to an annual rate of 1% from 2% in the third quarter. For all of 2015 GDP grew only 2.4%, holding at a sub-par rate compared to previous economic recoveries.

Equally concerning, and helping explain both the fast pace of new jobs and anemic wage growth, were the latest productivity figures. In what should have been front page news, the government reported March 3 that U.S. nonfarm business sector labor productivity, an index of real output divided by an index of hours worked, actually decreased at a 2.2% annual rate in the 2015 fourth quarter. This key barometer of the nation’s standard of living and the only sustainable basis of earnings growth grew by only 0.7% in all of 2015—the fifth consecutive year of sub-1% productivity growth and now unquestionably an ominous trend.

Presidential candidates will no doubt welcome Friday’s headline jobs numbers as a sign that the national economy continues to be healthy and focus on other hot-button political issues. But the more fundamental GDP and productivity trends are flashing amber signals. Unless reversed these trends could anchor the U.S. economy, wages and jobs for years to come.

Let’s hope that after the November elections Democrats and Republicans can transcend political polarization and put forward balanced measures to grow productivity and the economy as well as maintain full employment. Recent economic data suggest they will really have no choice.