June report: Jobs, wages, and hours

And a comparison to Los Angeles

Update since Friday: In the local papers, Kevin Smith had a somewhat amusing article on labor unrest at Medieval Times (I should say that about the content, not Smith’s reporting, which is excellent). The article highlights issues with pay and working conditions. I didn’t know that new employees at MT are referred to as “squires”! And Jonathan Lansner replies to some of the arguments he gets from readers about his writing on inflation - mostly about the politics of it all. I am so grateful to you all for being such a comparatively polite audience!

On Friday, the BLS released its first set of regional labor market statistics for June. From the survey of firms, called the “establishment survey”, we learned that the Inland Empire gained 5,200 non-farm jobs from May to June (not seasonally adjusted), and the number of jobs was up 5.9% from this time last year. This compares favorably to Los Angeles metro area, which saw a gain of 5.5% year-over-year.

The 5,200 increase came from gains in trade, transportation, and utilities, as well as professional and business services industries. It was offset by small losses in leisure and hospitality, although this sector still showed a 4.1% year-over-year gain in jobs.

Results from the household survey were also released on Friday and painted a slightly different picture, but I’ll save that for a future post - either this Friday or (more likely) next Tuesday.

The highlight of the Friday release was on the establishment survey, and in addition to jobs, the latest data on average earnings and weekly hours worked was also reported. These statistics have their own story to tell: while employment numbers remain strong, there are weaknesses in the growth of worker pay.

Recently wages IE have been declining, and hours worked have stayed flat, and this was no different in the recent data. See the chart above, which shows the decline in wages started after January of this year. Average earnings in June were $27.83 per hour, while average weekly hours (chart below) were 35.6. Put together, these trends mean that IE workers are taking home less pay every week than they were just 6 months ago.

Los Angeles is doing better, but only by a little. Average earnings in Los Angeles were $36.27, up from $34.06 a year ago, while hours were down from 35.2 a year ago to 35 in June. In a healthy labor market, as workers gain more bargaining power, we should see wages and hours going up, so these data have been a puzzle for some analysts.

While a bit of a puzzle, we have seen a national slowdown in wage growth, so the numbers don’t come as a complete surprise. Still, they are not a good sign. See the link here, from the Peterson Institute for International Economics (PIIE), a D.C.-based think tank. The PIIE explains that employer demand for workers might have waned due to expectations about the future state of the economy, driving down wages even in a time of low labor supply. I agree and I would add lower productivity as an additional factor – while job openings remain at a strong level, if workers you’re thinking of hiring are less productive, you’ll be less keen on making them an offer.

You can rest assured that the IE Economic Update will keep an eye on these trends as we move through the second half of 2022.