Labor data with structural changes and labor shortages

Posted by: Paul Donovan

01 Nov 2019
  • US employment data is due. The labor market has grown at an unsustainably fast pace for some time. The number of people hired each month (change in payrolls) has to slow. The challenge is working out whether any slowdown is caused by a lack of people to hire, or a lack of jobs to be filled.
  • Average hourly earnings are due. Average hourly earnings are not wages. Average hourly earnings have never been wages. Journalists should stop calling average hourly earnings wages. Most people are getting, on average, decent increases in earnings. It is worth noting that average earnings, and indeed much of the employment report, poorly capture the structural changes of the gig economy.
  • Swiss National Bank President Jordan has been praising negative rates (again). The Swedish Riksbank, the first to experiment with the drug of negative rates, has made it clear that it wishes to kick the habit as it is unhealthy. Negative rates act like a tax – and like any tax, after some time people change their behavior to deal with it. This creates potential economic distortions.
  • The US ISM manufacturing sentiment opinion poll – an inaccurate assessment of a small and shrinking fraction of the US economy – is scheduled for release.

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