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Friends,
Friday’s jobs report — showing that America added 172,000 jobs in May — stimulated a lot of celebratory bullsh*t.
Trump said, “It’s raining jobs!” White House National Economic Council Director Kevin Hassett claimed the job market is "hitting on all cylinders.” The mainstream media called it a “blowout jobs report,” “stronger-than-expected jobs data,” the labor market’s “best three-month stretch in more than two years.”
What all this acclaim left out was that wages are falling relative to prices.
Average hourly earnings for private-sector production and non-supervisory workers — that is, for most employees — rose by only 8 cents (or 0.2 percent) in May. That’s the weakest pace of wage growth since 2021.
Meanwhile, prices are rising quickly — by around 3.8 percent annually. Hence, real wages — that is, their actual purchasing power — are dropping. The paychecks of most American workers aren’t covering rising costs. They’re getting poorer.
It’s no cause for celebration that the American economy is adding a lot of jobs that are paying less. Hell, if paychecks keep shrinking relative to prices, there’s no telling how many jobs can be added. June’s job report could top May’s 172,000 new jobs.
There’s no limit to the number of terrible jobs an economy can create. If inflation-adjusted pay keeps dropping, we could see many hundreds of thousands of crappy new jobs per month. But most Americans would be getting poorer and poorer.
Bottom line: Don’t fall for any breezy, celebratory focus on the number of new jobs. Always ask: What about real (inflation-adjusted) wages?
When real, inflation-adjusted wages are dropping, we’ve got a real problem — regardless of how many jobs are being created.
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