Filling in today for Paul Vaaler, is AARON SOJOURNER, a labor economist and associate professor at the University of Minnesota Carlson School of Management Department of Work & Organizations.
Interpreting the Jobs Report
The monthly jobs report is market-moving information. It’s the single most important, timely signal of change in the economy and especially how the economy is affecting working families. Since I returned to Minnesota to Carlson, I started doing a Jobs Day briefing every month on Twitter. People can follow me @aaronsojourner. For examples, see:
Last month: https://twitter.com/i/moments/903615097884508160
First month: https://storify.com/aaronsojourner/jobsreport-2017-july
We can discuss this stuff in depth as an advance preview of Friday’s report. Main points:
• We are continuing the longest-running streak of private sector and total job growth on record. After massive job losses in the Great Recession starting near the end of the W Bush administration, we started adding jobs to the economy in late 2010. Ever since then, we’ve been adding jobs every month.
• Job growth is weakening over the last couple of years. From January through August of this year, we’ve added 1.2 million new jobs to the economy. But compared to last year, that’s 16% lower than last year and 23% lower than 2 years ago. In fact, it’s the fewest jobs created January to August in any year since 2012.
• CEA estimates that the economy needs to add about 80 thousand new jobs every month to maintain a steady, low unemployment rate given demographic changes. Every month that we are above that number, the market is strengthening. If below, then we are losing ground.
• The quality of jobs matters too. The most important Jobs Report statistic for families is wage growth. It measures how economic change is affecting their earning power. We finally started to see substantial real wage growth and the growth was actually fastest for those earning the least per hour. That is due largely to the tightening labor market but also likely the rollout of minimum wage increases in many states and locales. Wage growth among retail and service workers was faster in states that raised their minimum wage than in states that didn’t.
Promised wage increase by Target.
• Target seeking to differentiate itself in the retail labor market. Wants to be employer of choice. Doesn’t want to lose its best people. Wants to send signal that company values its employees’ contributions.
• Pressured by tightening labor market. But also by the Fight for 15. Significant that they announced a date for $15, not $14 or $16.
• This is a challenge to the Econ101 view of the labor market, which says that each person is paid exactly what they individually contribute to the bottom line of the firm. They are paid no more and no less than that. That there is a very liquid labor market out there where they can quit a job today and get a job with the same compensation tomorrow. And that firms can find a perfect substitute for any worker costlessly.
• Anyone who thinks about it knows that that Econ101 view of the labor market is missing a lot. The last 30 years of labor economics have given us a richer, more realistic view of the labor market – that includes the fact that there are costs to finding jobs and finding employees. That information does not flow costlessly and perfectly and it can be hard to make good matches of people to jobs.
• Target doesn’t know that tens of thousands of its employees all over the country will each contribute exactly $15 to its bottom line a few years from now. Econ 101 is not the way the real labor market works. Each potential match of an employee with an employer would create some economic value. If that value exceeds the minimum wage, then that person might get that job – if neither the worker nor the boss has a better match available. How much will the job pay? Well, there’s wiggle room in dividing that surplus. Here’s Target saying, we intend to share more of that surplus with our employees, in a bid to keep them and to improve to keep its applicant pool strong.
My research on improving teacher effectiveness
I helped create a research partnership with the Minneapolis Public Schools, the U, and St. Kate’s where we bringing analytic capacity from the Carlson School and elsewhere to help the district drive continuous improvement in teaching. In the last few years, they have introduced a number of best-practice personnel strategies, usually in some form of labor-management partnership with the teachers union.
They started doing robust evaluation of teacher effectiveness combining information based on surveys of each teacher’s students, multiple observations each year of each teacher teaching scored against a standardized rubric of effective instruction that was developed in partnership between labor and management, and gains among a teacher’s students on achievement tests across the year. This gives the district as robust a view into teachers’ effectiveness as any district in the country and any company or organization in the state. They have introduced ways to accelerate the hiring of external applicants so they can attract the best talent into the district by hiring in early spring instead of waiting until summer.
We have connected 8 years of teacher applicant resume data to measures of effectiveness and retention among those hired and are building predictive models that can be used to summarize a huge body of evidence and experience about what kinds of candidates turn out to be the most effective and longest-lasting hires.
The teachers’ contract is expiring and will be renegotiated in coming months. It’s the most volatile kind of negotiation because we have a new superintendent and a new local union president. I teach labor relations and collective bargaining at Carlson and do a lot of research in this area. This is a textbook case where great care will be required to achieve a productive agreement, where each side can see gains on its priorities, and everyone in the district is left with a strong shared understanding of how to move forward together.
Listen to today’s segment below…