The August jobs report

From The Washington Post:

Job growth slumps in August

By Danielle Paquette | September 1 at 8:31 AM

Job growth lagged in August, with the economy adding a lower-than-projected 156,000 jobs and the unemployment rate ticking up slightly to 4.4 percent.

Average hourly wages rose 3 cents last month to $26.39, up 2.5 percent from a year ago — a raise economists call tepid and government officials say “has room for improvement.”

The growth missed expectations, as analysts thought federal economists would report approximately 200,000 new jobs in August.

While the unemployment rate crept up from a 16-year-low, the increase is still within the margin of error.

“Growth was slower in August, but that’s because there were fewer gains in growing industries, not because we’re seeing more losses in shrinking industries,” said Jed Kolko, chief economist at Indeed.com. “We’re actually at a point of unusual stability.”

There’s a lot more at the link, including an end of the article graph noting that the U-6 rate is at 8.6%; I refer to U-6 because it is a better indicator, to me, of the real employment situation, counting both ‘discouraged’ workers, who would like a job but have given up looking, and people who need full-time jobs but are working only part-time because that’s all they can find.

One point I have made consistently is that trusting economists’ projections as the basis for government policy is foolish, and this story is another example: in projecting 200,000 new jobs, while the result was only 156,000, economists overestimated job growth my more than a quarter, by 28.2%. This wasn’t a projection into the future, but an estimate of what has already happened. If economists can’t be trusted to estimate what has already happened, how can we have any faith in what they tell us a given policy will do years into the future?

Heather Long quoted part of the story in this tweet:

With an 8.6% U-6 rate, why would they? Given that much of the problem of businesses being unable to hire is due to a skills mismatch, raising wages simply leads to poaching, which would lead to higher wages, eventually causing real problems for businesses. Businesses want to secure profits rather than go out on a limb; the 2008 recession taught them that lesson, the hard way.