Quick thoughts on the new employment report

1. Labor force participation is down once again, and we cannot dismiss the notion that a new recession may be starting.  That said, at current margins I am not sure the traditional distinction between cyclical and structural factors still makes sense, so that word “recession” may be more misleading than illuminating.

2. Scott Sumner noted: “Some die hard opponents of “The Great Stagnation” had held out hope that a fall in U-6 unemployment (the broadest measure) would propel future growth.  Now even that option is mostly gone, as it plunged to 10.0% in September, the same level as in February 1996.)  It will go a bit lower, but it no longer represents a large cache of workers waiting in the wings to propel us forward.  Get ready for the new normal—3.0% NGDP growth—it’s coming soon.”

3. There is no wage acceleration gain to be seen in the report.

4. Paul Krugman is (correctly) morphing back into more of a supply-side interpretation of secular stagnation: “Second, secular stagnation — persistent difficulties in achieving full employment — is a real concern if potential growth is slowing due to a combination of demography and weak technological progress, which seems to be happening. Lower growth means lower investment demand, so getting the private sector to spend enough gets harder.”

5. The case for a Phillips curve appears weaker than ever.

6. There is more and more evidence that we’ve shifted into a new regime where wage growth for most income classes simply doesn’t happen to any significant degree.  This may not last forever, but it remains the status quo and too many people find it too hard to wrap their heads around that.  That to me is the single biggest takeaway.

Neil Irwin at the NYT summarizes the report.


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