US Productivity Falls
The Bureau of Labor Statistics has published some preliminary insight into cost and productivity factors in the US labor market. Readings for the first quarter of this year show that Nonfarm Productivity has decreased by 1.7%, this represents an fall on the previous quarters growth rate of 2.3%, economists had been expecting a fall of just 1.0% in productivity during the quarter. The Unit Labor Cost reading has risen by 4.2%, this follows a fall of 0.4% on the previous quarter and misses the 2.6% change expected by the market.
On the surface the unemployment situation is steadily improving in line with the slow but sure economic recovery. Last week saw the official unemployment figure fall to 6.3% in the US and the Nonfarm payrolls number evidenced the addition of 288k new jobs within the economy during the month of April.
All however is not as it seems, more and more Americans are opting out of the labor force as the Labor Force Participation Rate steadily drops. The headline Unemployment and Nonfarm Payroll statistics do not readily capture the decline in working age adults no longer signing on for participation in the workforce. It is estimated that currently there are just over 101Million Americans of working age that are without work, allowing for population growth this contrasts starkly with data from 2000 where just under 75Million Americans of working age were jobless.
A further troubling trend in the US employment data is the structure of the jobs market for those that do have work. An increasing percentage of new jobs created are on a part time basis, despite this more and more working adults are expressing a desire to undertake full time employment.
It is clear why the Federal Reserve untied it’s monetary policy decisions from unemployment data improvements. The headline jobs metrics of the past are no longer fit for purpose.
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