October 31, 2018

Supposedly Impressive Economic News That Isn’t

Filed under: Economy,Environment,Taxes & Government — Tom @ 8:13 pm

Though things are going well in the national economy, two recent results have been overhyped.

Exhibit A: 3.1 percent Wage Gains in 12 months

Outlets like CNBC are making a big deal out of the government reporting today that “(Private-Sector) Wages and salaries increased 3.1 percent for the 12-month period ending in September 2018 and increased 2.6 percent in September 2017. The cost of benefits rose 2.5 percent for the 12-month period ending in September 2018 and increased 2.4 percent in September 2017.”

The fact that this 3.1 percent figure is “the biggest increase in 10 years” (per CNBC) is indeed nice to know. But the problem is that inflation for the period involved (Sept. 2017 through Sept. 2018) was 2.3 percent (scroll to the very bottom at the link for the indexed figures).

What we need to hope is that energy costs moderate, or even go down. They’ve increased by 9.6 percent during the past 12 months.

(That’s pretty significant, but we should not forget that it would have been much, much worse, and might have even created recessionary conditions in much of the world, had President Trump not strongly encouraged Saudi Arabia to increase its output during the summer. A Democratic administration would have done nothing, in the name of capitalizing on very high oil and gas prices to demonize oil companies and pushing the climate alarmists’ agenda.)

If oil barrel and consumer gas prices flatten or even decline (as is happening) and stay there for a while (as seems likely), and 3 percent-plus compensation increases continue, the economy will finally be on track to generate real wage gains that the average person will really feel.

Exhibit B: Ohio’s “Best in 21 Years” Jobs Performance

CNS News highlighted how Ohio added 104,600 jobs during the 12-month period ending in September — the best such result in 21 years.

That’s positive news, but the real reason for the best-in-21-years performance is that the state’s economy has been governed so poorly during almost that entire stretch.

The giveaway is in a statement found here: “State labor officials say it represents Ohio’s largest workforce ever after employers added more than 4,000 jobs last month.”

Why would they be excited about that? Isn’t every increase in recent months adding to “Ohio’s largest workforce ever”?

The answer is “NO.” State officials cited September’s figure because Ohio’s total employment finally reached its highest level ever for the first time in over 18 years:

OhioEmploymentJan1996toSept2018

Ohio’s economy began to decline in the middle of 2000. The slow-motion shrinkage continued even after the national economy’s recession ended. While the rest of the economy had a reasonably strong run during the middle of last decade, Ohio’s total employment continued to fall, largely because Republicans and then-Governor Bob Taft imposed onerous tax increases in 2003.

What was a steady decline turned into a 400,000-job freefall during Democrat Ted Strickland’s term in office from 2007-2010.

Republican John Kasich — at least he’s still rumored to be one — has overseen Ohio’s long-overdue return to record employment. But it should not have taken over 7-1/2 of his eight years in office to occur. (I should also note that as of September 2018, private-sector employment of 4.8539 million is still below the Buckeye State’s March 2000 peak of 4.8478 million.)

I believe that there are only three other states where total employment has failed to recover to a record level from a 2000 or 2001 peak (private sector peak months differ from the overall peaks):

  • Connecticut: July 2000 peak – 1.7028 million; Sept. 2018 – 1.7013 million; net loss of 1,500 jobs (but the Nutmeg State has gained 17,000 jobs in the private sector).
  • Michigan: April 2000 peak – 4.6908 million; Sept. 2018 – 4.4392 million; net loss of 222,000 jobs (180,000 in the private sector)
  • West Virginia: May 2000 peak – 767,500; Sept. 2018 – 751,700; net loss of 15,000 jobs (21,000 in the private sector)

One other marginal performers during the past 18 years — but still more positive than Ohio — have included Illinois, Mississippi, and New Mexico,

I originally thought Pennsylvania might be a laggard, but I should have known better. It has had a net gain of 313,000 jobs from its February 2000 peak. It’s no coincidence that the Keystone State has encouraged hydraulic fracturing, while the Kasich administration’s continuing interest in imposing an onerous severance tax has stifled the state’s oil industry.

I suspect that if the rest of New York were segregated from Metro New York City, we’d see similarly negative results, largely due to Governor Andrew Cuomo’s fracking ban.

Other than that, I don’t believe any other state besides the three noted above has performed as poorly as Ohio for such an extended period.

One more thing about Ohio: Metro Columbus has picked up 157,000 jobs since its January 2001 pre-recession peak. That means the rest of the state has lost about the same number of jobs. It’s more than fair to accuse state government of neglecting the rest of the state’s economy for almost two decades.

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1 Comment

  1. [...] wage growth is finally on the verge of occurring. As explained Wednesday, if energy price increases mitigate or start to fall (and as long as inflation remains generally in [...]

    Pingback by BizzyBlog — November 3, 2018 @ 11:33 pm

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