July Labor Report Hides Truth
By Joe Guzzardi
The July Bureau of Labor Statistics report was a blockbuster. The economy created 528,000 jobs, and unemployment dipped to 3.5 percent, well ahead of Dow Jones’ 258,000 new jobs and 3.6 percent unemployment estimates. Wage growth also rose; average hourly earnings increased 0.5 percent for the month and 5.2 percent year-over-year, higher than, respectively, the .03 percent and 4.9 percent Wall Street estimates. A .05 percent increase, however, keeps consumers getting poorer as inflation last month proceeded at an 8.5 percent rate.
But no federal government report merits more skepticism than the monthly BLS. If the jobs market were truly booming, then the labor participation rate should be climbing. Instead, the participation rate is falling.
The number of Americans not in the labor force, those who neither have a job nor are seeking employment, climbed past the 100 million mark again in July, hitting 100,051,000, a 239,000 increase from June. From May to June, the previous 2022 reporting period, Americans detached from the labor force increased 510,000. The July report showed that labor participation was 62.1 percent.
A Congressional Budget Office analysis found that a lower labor force participation rate is associated with lower gross domestic product (GDP) and lower tax revenues, with larger federal outlays because people who are not in the labor force are more likely to enroll in certain federal benefit programs.
A deeper dig into the July statistics found that leisure and hospitality led the way in job gains with 96,000, although the industry is still 1.2 million workers shy of its pre-pandemic level. Professional and business services were second with 89,000. Health care added 70,000 positions, and government payrolls grew 57,000. Goods-producing industries also posted solid gains, with construction up 32,000, and manufacturing adding 30,000. Despite repeated alarm bells sounded by Walmart, Target and other big box stores that consumer demand is weak, retail jobs increased by 22,000.
Superficially, the job growth looks encouraging. But the wages that those jobs pay can’t support a household of four, or perhaps not even the individual worker. Leisure and hospitality workers, which BLS classifies as cooks, bartenders, waiters, hotel housekeepers and food preparation supervisors, earn an average of about $30,000. Professional and business services earn $40/hour; health care, $29,000; goods producing industries, $30,000, and retail workers, $29,000.
In order for blue-collar workers to advance into the middle-class lifestyle, they need the labor market to get tighter, a challenge since the border is open; temporary guest worker programs are expanding, and legal immigrants receive lifetime valid employment authorization. During the Biden administration, nearly 2.5 million border crossers have entered the U.S. Biden’s intention is to give most if not all parole status that includes work permission. Over the last 15 years, the State Department has issued millions of guest worker visas to foreign citizens who perform blue- and white-collar jobs. In fiscal 2022, the U.S. will accept 2.1 million lifetime work-authorized legal immigrants, a record number, that will swell the labor pool.
To help U.S. workers, the labor market should be tight. Fewer immigrants would push wages higher and move Americans up the economic ladder. People would become more productive and less welfare dependent.
When Congress returns after Labor Day, campaigning for the mid-term elections will begin in earnest. Most of the politicians will promise to elevate the electorate’s lifestyles. But few will mention the important role that reduced immigration would play in boosting wages.