The Daily Update - Unemployment; Lies Damned Lies and Statistics

This month marks ten years of the current US economic expansion, if we extend this cycle into July then this will be the longest expansionary period since 1854 (according to that one armed economist) surpassing the 1991-2001 growth cycle.

That achievement is impressive; however, it is difficult to find any great highlights to the current expansion except maybe the current low unemployment level with the rate at 3.6% in May, the lowest in 50 years. So why has wage inflation not raised its head in any meaningful way as would normally be expected by all our one armed friends? This has confused observers over the recent past: the Fed raised the funds rate naming tightening labour market conditions as a major reason, looking for wage growth to push up price indicators. However, we still see official inflationary measures below the Fed’s 2% target.

The reasons for this are many but a recent argument, which should be considered, is that it would appear that employers have moved towards giving jobs to those that in the past have struggled, the handicapped, racial minorities, the less educated and (whoo hoo) older workers and this has kept a lid on wage growth.

According to the Bureau of Labour Statistics only 3.1% of men aged between 25 and 54 are officially unemployed, however, a further 10.8% were out of the labour force entirely as people who stop looking for work or are in part time employment, although seeking full time employment are not included in the main measure of employment.

The argument remains that although there is such a low level of headline unemployed the numbers mask the true picture of workers afraid to risk their jobs and request a pay rise, there is an invisible reserve of labour adding to job insecurity even though this current expansions greatest accolade is the historical low level of unemployed.

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