This post is excerpted from the permanent Employment Charts page, which includes numerous additional charts and analysis on key employment metrics.
Average hourly earnings rose by 1.3 % y/y in January, down from 2.7 % in December. Such month to month volatility is typical. On a smoothed basis the 12 month moving average has been near 2% since late 2011. Average weekly earnings fell 0.2% in January versus a gain of 4.2% in December. These numbers were skewed by fiscal cliff tax increase front running in December and the resulting void that followed in January. The 12 month moving average of weekly earnings dropped to near 2% in January. It had beer running mostly 2.5%-3% until the fourth quarter of 2012.
There’s some evidence that average earnings follow Fed policy, but with some lag on the upside. It will be interesting to see if earnings respond to QE3 and 4 in the months ahead.
Average hours worked fell by almost an hour to 34 in January They had risen by a half hour from 34.4 to 34.9 in December. Many employers tried to cut hours of employees to less than 30. Under Obamacare, employers do not need to pay fines for not providing health insurance to workers working less than 30 hours.
The downward pressure on hours and earnings shows that the majority of workers are easily replaceable and expendable. Labor still has little pricing power in the market. There’s a skills mismatched between high skill high wage jobs, and the capabilities of the work force. The 7.9% unemployment rate is probably “normal.” The bubble unemployment rate of 5.5% was abnormal.
The Fed’s goal is to continue QE until the unemployment rate hits a target of 6.5%. Therefore the real but unstated goal of Fed policy is to foment the next bubble to generate millions of fake jobs, similar to the 10 million fake jobs created in the housing bubble, which disappeared when that bubble deflated. The problem with such a policy is that as the economy overheats and inflation forces the Fed to stop printing, all the new fake jobs will once again disappear.
Permanent Employment Charts page
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