Workers’ wages and benefits are finally rising at a decent clip from being fully employed, said the Labor Department. Total compensation, including health and pension benefits, rose in 2018 2.9 percent, up from 2.8 percent in 2017. That’s the biggest 12-month increase since the fall of 2008, reports MarketWatch.
The BLS just reported that Compensation costs for civilian workers increased 0.7 percent, seasonally adjusted, for the 3-month period ending in December 2018. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.6 percent and benefit costs (which make up the remaining 30 percent of compensation) increased 0.7 percent from September 2018.
And as a prelude to tomorrow’s unemployment report, the weekly initial jobless claims reported by states rose abruptly in the January 26 week, up 53,000 to a 253,000 level that leaves the forecasters, at a consensus 220,000 and a high estimate of 225,000, scratching their heads. This is the highest total in more than a year-and-a-half.
Was this an anomaly? Furloughed Federal employees from the government shutdown may be some of the answer but not all of it. They did add nearly 15,000 to the headline drop which is down more than 10,000 from the prior week, said Econoday. Contractors tied to the government (who don’t get any back pay) also likely added to the total though there are no specifics available in the data.
This leaves guesses about tomorrow’s January unemployment report up in the air. It’s likely to be much less than the gangbuster’s December report of 317,000 payroll jobs rise. It’s more likely to be around 180,000, which isn’t bad after all the geopolitical problems, such as Trump’s trade wars. Other countries are beginning to retaliate with their own higher tariffs. This doesn’t make for optimistic prognostications about future growth.
The International Monetary Fund is also downgrading worldwide growth due to the growing uncertainties such as whether Brexit will happen and the EU’s slowing growth, along with declining world trade projections.
The 2017 Republicans’ Tax Cut and Jobs Act hasn’t helped, either, which MarketWatch’s Howard Gold has labeled the Shareholder and CEO Enrichment Act of 2017.
“Corporations, big shareholders and top corporate executives reap the lion’s share of the gains from the 2017 tax cut. It didn’t boost economic growth that much, didn’t start a capital spending boom or U.S. manufacturing renaissance, didn’t bring overseas profits back home, and might have led to modest job growth but little discernible wage increases. And we’ll all be stuck with the bill for a long, long time.”
But why focus on the negatives, when American workers are finally benefiting from being fully employed? Job growth has picked up, having risen by 2.6 million in 2018, vs. a gain of 2.2 million in 2017. It’s unclear how much of that can be attributed to the tax cut, as I said, since health care and professional and business services jobs set set the pace, as they have for the past 30 years.
Let us see what tomorrow’s unemployment report looks like before we make any rash growth projections for 2019.
Harlan Green © 2019
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen