Commentary: Labor market still has ways to go to return to normal
WASHINGTON (MarketWatch) — So, it’s all well and good that Wall Street liked the data coming Thursday morning from Automatic Data Processing and the Labor Department.
ADP reported that 157,000 private-sector jobs were created in June, and the Labor Department said jobless claims fell in the week ending July 2 to 418,000. See full story on ADP report.
The reports heightened expectations for Friday’s report on nonfarm payrolls, and some economists on the Street already were raising estimates from the MarketWatch-compiled consensus of 115,000.
And there’s nothing wrong with that, particularly the news the ADP gains were weighted toward small businesses, which have struggled to get access to credit after the recession.
Expectations for the economy deteriorated after a wave of weak data in May, and only now have begun to rebound after some better-than-expected manufacturing and now labor-market reports.
Japan Inc. has got back on its feet probably even more quickly than expected, much to the benefit of American automobile makers that rely on that country’s supplies, and energy prices have at least receded from the springtime highs even as oil begins to flirt with $100-a-barrel again.
But better-than-expected data doesn’t mean good data. It would still take years of 200,000-plus-per-month jobs creation to make a serious dent in the unemployment rate, and the private sector will have to compensate for lower spending by federal and notably state and local governments.
The other key labor-market metric that has largely been overlooked has been the muted wage growth. If average earnings start to pick up, then the average American will really begin to see the fruits of a recovery that for most has largely been in name only.
That doesn’t look likely, not soon anyway. Just like analyst earnings projections, economic data have a pretty low bar these days. Clearing a 2-inch hurdle by a foot doesn’t make an Olympian.
