Jobs data, unemployment, and a lack of wage growth

Jake has been providing excellent coverage about the current economic and jobs data and how wage growth here was been more of an illusion than a reality.

In July 2022, Jake reported that unemployment in Wisconsin has been at record lows — below 3% — but that job growth is stagnating.

What this indicates to me is that things are actually still very healthy in Wisconsin’s jobs market, but we still can’t find enough people at publicly facing service jobs to have a typical round of Summer hiring. Some of this may be wage-related, but I also think it is due to a demographic issue that the state has been dealing with for several years.

This is something touched on by the Wisconsin Policy Forum as part of a wider discussion of the changes in the state’s jobs market in the COVID era.

“In the past, we have discussed how Wisconsin’s aging population, low birth rate, and lackluster net migration figures have led to a reduction in the working-age population (here defined as individuals between the ages of 18 and 64). The Wisconsin Department of Administration projects the state’s working-age population will remain roughly the same size – if not decline slightly – until at least 2040.

“Indeed, from 2010 to 2019, Wisconsin’s working-age population declined by 1.0%. While the state’s overall adult population (ages 18 and older) is growing year-over-year, there is a much more rapid increase in those over the age of 65. In other words, Wisconsin’s residents are reaching a typical retirement age at a much faster rate than they are entering the workforce, shrinking the overall labor pool. On top of that, the pandemic caused more people to retire at earlier ages, and it is still unclear to what extent those retirees can be lured back into the workforce.”

All of this information indicates we have a state that seems to be maxed out on workers, and needs to find ways to attract more people to come here.

As confirmation of these findings, Jake previously noted that job growth in construction and manufacturing in Wisconsin has also been stagnating.

As Jake described in June 2022:

But even with another 54,500 jobs added in the state since May 2021, Wisconsin’s 1.9% rate of job growth is less than half the 4.5% rate of growth the nation has seen in that time period. And with 2.9% unemployment in a state that has labor participation more than 4% above the national average, it makes me wonder just how many more jobs can be added in the state today.

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It also tells us that the longer-range challenge for the state is to get people to locate to a cold-weather place that traditionally hasn’t paid as much as nearby big markets like Chicago or the Twin Cities.

And, in May 2022, Jake was reporting about “gold-standard” job numbers in Wisconsin that:

So what the QCEW tells me is that our state still has jobs left to gain, but our 2.8% unemployment and relatively low population growth might mean there isn’t much more to gain back. The monthly jobs reports have been positive so far in 2022 (up by nearly 30,000), but let’s see if that growth in wages can start matching the US rate, and can keep workers ahead of the rising prices that we have seen in this year.

Like Wisconsin, Minnesota also has been experiencing record low unemployment. The Economic Policy Institute discusses this low unemployment rate in Minnesota and what it may actually mean.

First, the number of jobs that exist now is still less than what existed before the COVID-19 pandemic.

And yet, every single one of these states still had fewer jobs in June than before the pandemic. EPI’s Economic Indicators page shows that the United States is still down 524,000 jobs from its pre-pandemic peak. If we account for population growth over the last 2.5 years, the country has 3 million fewer jobs than we would expect if pre-pandemic trends had continued.

Second, labor force participation — the number of people working or looking for work, called an LFPR — is also down from what existed prior to the pandemic.

In Minnesota, the LFPR in February of 2020 was 70.8%. This was considerably above the national average of 63.4%, reflecting Minnesota’s strong employment numbers. By June of 2022, however, Minnesota’s LFPR had dropped 2.3 percentage points to 68.5%. That is larger than the national drop of 1.2 percentage points, from 63.4% to 62.2%. This means that while there is a historically low share of Minnesotans who say they’re looking for work and can’t find it, there is also a substantial share of adults in Minnesota who, since the pandemic hit, are no longer working and not looking for work. In fact, Minnesota’s decline in labor force participation from February 2020 to June 2022 is the 9th largest in the country.

Third, inflation is disconnected from these employment and unemployment numbers.

EPI’s Josh Bivens has explained in detail how current high levels of inflation are the result of global supply-chain problems caused by the pandemic and corporations exploiting the situation to extract larger profits than normal. If low unemployment was a primary driver of inflation, we would see an increase in wages above the rate of inflation, but the opposite is happening. Wages, far from contributing to price increases, are lagging behind price increases, and wage growth is decelerating significantly.

Fourth, the sectors of strong job growth are areas that are attracting new employees who previously were not looking for work at all.

In June, 73.1% of people who were newly employed were not counted as part of the labor force the month before. That is, according to the data, nearly three-quarters of the people who got a job in June weren’t looking for a job in May. This strongly suggests that there are many people interested in re-entering the labor force if there are good jobs available to them, jobs that allow them to balance work and care responsibilities, and jobs that adequately protect their health and safety.

Fifth, job growth, then, is highly dependent on policies that make what a few employers are doing to make work more flexible and to offer higher pay into a baseline for what all employers offer their employees. These policies include:

• expanded social and economic supports for child care and elder care
• criminal justice reforms that prevent arrest and conviction records from being used to deny employment opportunities
• economic support for affordable housing where jobs are located

Indeed, racial and ethnic disparities in job growth continue to exist at staggering levels.

Unemployment for Black workers continues to run nearly twice as high as that for white workers, and Hispanic workers have an unemployment rate 30% higher than white workers. These disparities persist—in both employment and wages—even when controlling for education and qualifications.

Sixth, because there is no actual connection right now between wages and inflation, higher wages in general are still urgently needed.

Simply put, higher wages attract people to the workforce. For example, shortages of teachers, school bus drivers, and other education employees are directly tied to the low wages of those jobs. States must also set higher wage benchmarks for home health care workers, too, as demand for those jobs is set to skyrocket in coming years. Additionally, supporting workers’ rights to organize unions is a vital tool in building a strong economy for all Americans.

Last, but by no means least, the minimum wage needs to be increased. Many states and cities have increased their minimum wages in recent years, with no discernible impact on the price of gas and oil, food, cars, or semiconductors. A federal $15 minimum wage would lift wages for tens of millions of low-wage workers across the country. In terms of purchasing power, the federal minimum wage is at its lowest level since 1956.

Another reason why Wisconsin UI is faring so poorly: terrible job growth in 2019

Jake has the 2019 gold standard numbers, and they are just terrible.

Wisconsin’s rate of job growth started to decline in mid-2016, and has pretty much gone down since then, with the except of a Bubbly 6 months after the GOP Tax Scam was signed into law. But last year was a new depth, with barely more than 5,000 jobs added from December 2018 to December 2019, and we even slipped below 0 in November before a small rebound in the last month of 2019.

Jake compares the jobs picture in Wisconsin with Minnesota, and the comparison does not go well for Wisconsin.

Total jobs added, QCEW 2010-2019
Minnesota    330,103
Wisconsin    227,993
Difference   102,110

Jake further points out that the 2019 data for Wisconsin reveals that Dane County by itself is providing the job growth for the entire state.

Jobs added, Wisconsin 2019
Dane County    +7,446
REST OF WIS    -2,367

As Jake concludes:

This data sure seems to indicate that we could learn something by being more like Minnesota and Dane County, because that’s what was working before the COVID-19 recession hammered everyone starting in March. And today’s report is yet another blaring piece of evidence of just how much we have been held back during the Age of Fitzwalkerstan. It needs to be ended ASAP, and it goes well beyond changing who is in the Governor’s office.

Because job growth has been so anemic in Wisconsin, unemployment is that much more important as a wage replacement. But, as indicated previously, Wisconsin’s policies over the last decade have made unemployment much, much more difficult to get. Now with the pandemic and absolutely no jobs available at all, folks who have been suffering under meager job growth the past decade have absolutely nothing to fall back on other than unemployment. And, that system is designed to be difficult and cumbersome.

The Evers administration could start fixing this system by actually following the law rather than subverting it, as it is currently doing by denying PUA benefits to the disabled (see the discussion of SSDI in this post). And, the Evers administration could take a look at what our neighbor in Michigan is doing to make an equally difficult unemployment system at least less burdensome on claimants and the workers who have to administer that system. The results of these efforts in Michigan speak for themselves:

Chart courtesy of NELP

In comparison to Michigan, Wisconsin will only begin to start paying out PUA benefits next week.

Wisconsin remains . . .

Unemployment is going away

The March 2nd edition of the Isthmus has an excellent cover story about unemployment changes the past few years. Make sure to read it.

The Department’s press release that same day provides some additional insight into what is going on with unemployment in this state.

Two issues arising from these news items deserve additional comment.

First, the response from the Department in the Isthmus story indicates that this expansion of concealment to include mistakes is intended.

Now, honest mistakes can lead to fines and criminal charges, Forberger says.

Tyler Tichenor, a DWD spokesperson, counters that the change was made “to make the definition clearer for claimants so they could better understand what they need to do to file a claim accurately.”

John Dipko, another department spokesperson, says the state is making a concerted effort to crack down on fraud and that referrals for prosecution began increasing even before the definition change.

“The number of referrals have gone up,” Dipko says. “We’ve been much more aggressive in referring the most egregious cases of fraud for consideration for possible prosecution.”

The change Mr. Tichenor is referring to is the 2015 change in the statutory definition of concealment. He is NOT referring to providing simpler explanations of unemployment issues for claimants or making the filing process easier to follow. No claimant (or employer for that matter) should be expected to review a legal statute simply to make sure he or she is doing what the Department wants him or her to do. Such a policy is akin to the IRS making everyone read the Internal Revenue Code when filing their taxes. Yes, the statutes govern. But, the agency responsible for carrying out those statutes has a duty to explain those statutory requirements as simply as possible and in a way that is not intended to confuse and trip folks up.

But, confusion and mistakes are the whole point of unemployment concealment now. For instance, the on-line filing process is now more complex, not less, with numerous requirements for which any single mistake can now lead to a charge of unemployment concealment.

And, this concealment push cannot be under-stated. When filing on-line, the first thing a claimant sees, even before he or she creates a user-id and a password, is this screen:

Notice the specific language being used here — “If you make a mistake or forget to report a material fact related to your claim . . . ” The Department is officially declaring here that a simple mistake or even forgetfulness can be the basis for a concealment charge.

Second, the Department’s press release about record-low unemployment claims and a sudden rise in employees’ wages indicate how significant the Department’s changes in unemployment have been.

Four issues in the Department press release on March 2nd highlight the changes being wrought by the Department. First, the Department reveals that September 2015 to September 2016 job growth in Wisconsin was 29,486 total jobs and 25,608 private-sector jobs. When compared to prior job growth numbers, this trend indicates that job growth is actually slowing in Wisconsin — 37,432 jobs from March 2015 to March 2016 and 39,652 jobs from March 2015 to March 2015.

In light of the Department’s push for charging claimants with concealment for their honest mistakes and the loss of work search waivers during the winter months for seasonal employees, three other points from the press release suggest what is actually going on.

• Quarterly wages by covered private-sector employers grew by 7 percent year over year. Total wages grew by 7.5 percent over the year.

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• Initial UI claims ended 2016 at their lowest level since 1988. Continuing unemployment claims ended 2016 at their lowest level since 1973.
• More people were employed last year in Wisconsin (November 2016) than at any point in our state’s history.

As indicated here, the number of people working in Wisconsin is at a record high level. (NOTE: this statistic could also be — and likely is as noted below — because the number of people in the state remains relatively flat.) This increase in working folk should indicate that Wisconsin has a “hot” job market. Employees would then have increased bargaining power and be willing to switch jobs when employers are less than fair or better opportunities appear to be available with other employers. Such a “hot” job market would suggest that unemployment claims would rise somewhat because of individuals trying out new jobs that do not work out or which prove to be less than hospitable. But, initial unemployment claims are at record lows. So, folks either are NOT leaving jobs at all or are NOT filing claims for unemployment benefits when job separations do happen (because of the Department’s concealment push). Finally, the fact that wages have jumped over 7% in one year without a “hot” labor market indicates that employers are voluntarily raising wages for the employees they already have even though labor turnover (signified by the record low number of claims being filed) is markedly down.

As indicated in the Isthmus cover story, employers this past winter were faced with employees who no longer had seasonal job search waivers when claiming unemployment benefits and so had to do four job searches a week along with all the other job search requirements the Department has enacted the past two years. Those employees are essentially making themselves available to be poached by other employers, and so the Department has created a competition for employees among employers where none existed before.

If employees were little more than replaceable cogs, this increased competition would still not lead to higher wages. But, for skilled work where employees are not interchangeable, employers need to keep their skilled labor because of the high replacement costs that arise when those skilled employees leave.

To avoid this whole government-created poaching regime, employers’ only real option is to keep their employees off of unemployment by “hiring” and paying them during winter months despite the lack of actual work available for these employees. In other words, some employers have found themselves handing out winter make-do work to keep their employees off of unemployment. With full wages (or even partial wages), these employees are doing financially much better than when they just received unemployment benefits that max out at $370 a week.

NOTE: as this COWS report indicates, the wage growth at issue here is a very recent development. In January 2017, the story in Wisconsin was the flat wage growth in this state.

Finally, this lack of unemployment benefits is affecting everyone — employers and employees — when the record low in continuing claims is considered. This statistic indicates that even when employees file a claim for unemployment benefits, that claim is stopped shortly thereafter because they are either denied benefits because of substantial fault or misconduct or because they fail to meet some new job registration requirement that Department has enacted. With no unemployment benefits available, the unemployed are out searching for jobs or they are leaving this state for greener pastures where jobs and unemployment benefits are available. The state’s relatively flat population growth the last few years — a 0.6% growth rate in 2010 is 0.2% in 2016 — bears this point out. Because of the Department’s drastic changes to unemployment, the state is certainly not becoming business friendly for most employers.