On the occasion of the scheduled fast food-workers strike today (Thursday, December 5), I thought I’d dip into the vault and repost something from earlier this year on a proposal to hike the federal minimum wage. Workers in around 100 U.S. cities are striking on demands that their wages be moved from the current federal minimum of $7.25 per hour to $15 per hour – that’s well ahead of what President Obama suggested in a State of the Union address back in February. What we look at in this post is why basic economics breaks down when talking about increasing the cost of labor. While you’re looking, you might want to check out a couple other posts I did on minimum wages: one on Washington state (who’s minimum wage is above the federal one) and one on the relationship between minimum wage and federal assistance.
Minimum Wage Hikes – or – What Econ 101 Didn’t Teach You
Your entry-level economics class taught you (or should have) that when the price of something goes up, less of it is consumed. This holds for cars, interest rates, widgets, and wages. So, during this week’s State of the Union address, when President Obama called for raising the federal minimum wage from its current level of $7.25 per hour to $9.00 per hour, and tagging the minimum wage to the cost of living, it drew a decent amount of criticism. Read more
The September jobs report was late. The shutdown of the U.S. federal government put the release back by several weeks. Then, when the data finally showed up, it was uninspiring…at best. Some might say, “meh.” (For the uninitiated, “meh” is an exclamation used to express a lack of enthusiasm). At only 148,000, the headline payroll-growth number disappointed. The pace of U.S. payroll growth has definitively slowed in the last six months, which strengthens the argument for the Fed to postpone tapering their QE program into 2014.
The mediocre details of September’s late report broke down like this. Private sector payrolls increased by only 126,000. Definitely “meh.” Read more
Last week, we put out a 2013 economic outlook. Our take on the U.S. economy is fairly positive…if the U.S. government can avoid the nastiest parts of the fiscal cliff. So let’s say that Republicans and Democrats can come to a solution, and the United States manages to avoid recession in the first half of the year. As the U.S. economy keeps improving in 2013, the unemployment rate should keep dropping, right? It’s dropped from 8.8% last November to its current level of 7.8% in about 12 months.
Well, as we get into 2013, don’t be too worried if that pace seems to stall for a while…at least, don’t worry that the recovery has stalled. Read more
So, today Automatic Data Processing Inc. (everybody calls them ADP) announced that they’ll be changing (their press release used the word “enhance”) the methodology they use on their widely followed monthly survey of private-sector hiring. For those of you who don’t know, ADP is a big payroll-processing company that also counts payroll numbers. ADP payrolls are important statistics to compliment the Bureau of Labor Statistics’ nonfarm payroll (NFP) data and have the potential to move the markets. Typically, the ADP report comes out the Wednesday before NFP info.
The problem – if you want to call it that – has been the criticisms that ADP’s data send out confusing signals. Read more
More and more interesting stuff comes out on the jobs report. My post yesterday mentioned some issues surrounding the change in the number of part-time workers in the employment numbers. I just came across this report from Robert Barbera at the Johns Hopkins Center for Financial Economics (thanks to Economist’s View for finding this). While I feel we’ll likely have to wait for several more months of data to determine if the lower unemployment rate is a trend or not, Dr. Barbera posits that the spike in part-timers is itself a trend, which he attributes to “faulty seasonal adjustments.”
Remember today everyone. Today’s the day that the unemployment rate fell below 8.0% in the United States. At 7.8%, this is the lowest unemployment rate since January of 2009. Don’t get me wrong, the economy has still got a long way to go, but you’ve got to admit that it feels good to see that number tick down. And the best part is…the unemployment percentage dropped not because people were giving up the search and dropping out, but because they were getting hired.
Here’s what it looked like according to the data release from the U.S. Bureau of Labor statistics (you can read their full report here). There was in increase in total nonfarm payroll employment during September of 114,000, while the unemployment rate notched down from 8.1% to 7.8%. This is based on the so-called Household Survey, where the BLS calls around to about 60,000 households every month to find out if people have been working, have been looking for work, or aren’t working.