The unemployment rate is at a 16-year low and the major stock indexes are scrape the sky — but the former Labour Secretary Seth Harris says he has reason to doubt the strength of the labor market.
“For me, the big number is the wages, the real wage is always the same,” said Harris, who served during the Obama administration. Real wages — the measure of the wage increases take account of inflation— rose by a seasonally adjusted 0.6 percent in may from may 2016, according to the Bureau of labor Statistics.
“This is not the sign of a market where the employers offer the services of work,” Harris said Monday on CNBC’s “Squawk Box”. “So, I’m a lot more bearish on the job market, as a lot of people are, and I think that we will see a slowdown in job growth.”
Commuters Fulton St.-Transport-hbu
He said that the anemic real wage growth is worrying, because it shows a lack of competition among employers for the work, even in highly qualified positions. In a normal labour market of full employment is approaching, would be forced the employers to increase the wages of the workers are scarce.
“In most parts of the economy, even in skilled labor, we are not easy to see the kind of dramatic real-wage growth, sustained real growth of the salaries, we need to see,” Harris said.
Despite historically low unemployment levels in the narrow U-3 measure, wages have not increased to Harris’ satisfaction. The discrepancy could be due to an increase in the number of Americans leaving the labour market as a whole, said Harris, and Abby McCloskey, a former Director of economic policy at the conservative American Enterprise Institute.
“It is really difficult to say, we have a healthy labor market, if workers are not getting a salary increase, and if more and more Americans decide to leave the workforce,” the founder of McCloskey’s policy, said on “Squawk Box”.
The economy is flashing warning signs, McCloskey said, in part because of the impact of the various Federal benefits programs such as food stamps, Medicaid, and Obamacare, which is an obstacle for the Americans, the entry into working life. Your recipe for the trump administration is the expansion of the earned income tax credit, a program that eases the tax burden for low and moderate-income households.
“Apart from the broader tax reform,” said McCloskey, a robust earned income tax credit “would be one of the greatest things that could Trump management, in order to increase the employment rates and wages.”