There have been many problems with what is otherwise relatively good jobs growth since 2013. Labor-force participation has not recovered, wage growth has been lackluster, and the percentage of job growth in low wage sectors — which began to normalize last year — has crept back up this year (as jobs were lost in manufacturing and the oil patch). But, somewhat more hidden from view, there's a nugget of really good news.
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Traders on the floor of the New York Stock Exchange.
First, the bad news: In October, we unfortunately returned to a situation in which a majority (53 percent) of the jobs created were in the lowest wage sectors (retail, administrative services, social assistance, and leisure and hospitality). These sectors are, in the aggregate, only about 36 percent of total employment so when we see those sectors grow disproportionately, it reflects a further deterioration in the quality of U.S. jobs, notwithstanding the healthy increase in quantity.
Also, the percentage of the employable population that is actually employed or seeking jobs — the labor force participation rate (LFPR) — is still stuck at a depressingly low 62.4 percent, suggesting that there are still many workers still on the sidelines. This means that the healthy wage growth seen in October is subject to disruption when/if that additional slack returns to work. The low LFPR has often been attributed to the retirement of the baby boomer generation, but this has been an exaggerated claim — LFPR for prime age workers (25 to 54) is also low. The number of hours worked is also not budging.
But here's the good news: In the past, most of whatever low levels of wage growth that had occurred was disproportionately concentrated in the 15 percent highest paid supervisory workers, while production and non-supervisory workers were taking it on the chin. This trend reversed itself in October, one of the few months that has occurred since the recovery began.
Plus, hourly wage growth in October was much improved, up 0.36 percent month over month, much better than the average for the year-to-date and a handsome recovery from an alarming decline the month before. But even that is not the best news in today's jobs report.
The really good news is that the rate of hourly wage growth for production and non-supervisory workers (0.43 percent month over month) — 85 percent of the total of all employees — was up more than the rate for all workers. This is something we haven't seen of late. And it means that the little guy did better than his boss.
Running the math, this means that managers' hourly wages grew by only 0.32 percent month over month, compared with the faster 0.43 percent month-over-month growth for the people they oversee. And this is a very good result.
It suggests that we are, at long last, seeing a redistribution of GDP growth to the ordinary worker, not just his boss. And it suggests that, on a relative basis, we have seen some limit to the wages and salaries that can be commanded by managers. Putting spendable (or save-able) cash in the hands of the vast majority of workers is a very good thing for those workers, it is a good thing for consumption data, it is a good thing for reducing income and wealth polarization, and it is a good thing for America.
Commentary by Daniel Alpert, managing partner of investment bank, Westwood Capital, a fellow of The Century Foundation and the author of "The Age of Oversupply: Overcoming the Greatest Challenge to the Global Economy." Alpert has 30 years of investment banking experience and heads Westwood Capital's real estate and hospitality industry practice. Follow him on Twitter @DanielAlpert.