National Data: December Jobs—American Job Share Up For Month, But Down vs. Immigrants For Year. Wage Stagnation To Continue Without Immigration Cut-Off
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First the good news: the Washington Post’s economics columnist Robert J. Samuelson has (not for the first time) smuggled into the MSM a reference to the need for “limits on low-skilled immigration” to combat income inequality (The ‘hollowing’ of the middle class? January 3, 2016). This has been a theme for, well, ever.

The bad news: on past form, Samuelson’s sensible statement will have absolutely no effect on MSM debate about immigration—the more so because America’s labor market ended the year with an impressive sprint as employers added 292,000 workers to their payrolls in December. Of course, the immigration dimension is unreported.

The Bureau of Labor Statistics also said employment was much stronger in November and October than previously reported. October’s gain was raised to 307,000 from 298,000, marking the biggest increase of 2015.

While the unemployment rate was unchanged, at 5%, it is now less than half the 10% plus jobless rate registered in the fall of 2009, and is hovering just above what economists consider full employment—a point where further declines should start to push up inflation.

But there is no inflation, and there is no wage growth. (Wages were unchanged in December; at this point in prior recoveries wages typically rose at 3% to 4% per annum.) The disconnect between job growth and wage growth has some economists questioning whether the old “Phillips Curve” model still applies—you know, the view that employment growth inevitably triggers price and wage inflation.

Belief in the old model impelled the Federal Reserve to raise interest rates a few weeks ago. But the old model assumed a “closed” economy, where companies had to raise wages in order to attract enough native-born workers. The mass immigration of unskilled workers from poor countries was never accounted for in those models.

Old models die hard: analysts are still scanning the employment and wage figures for signs of how quickly the Fed will follow up with further rate increases. Our prediction: wages will continue to stagnate until rates of legal immigration are slashed and illegal alien workers are expelled from the workforce. That may come sooner than many in the Republican Establishment believe.

The “other” employment survey, of households rather than employers, reported an even more impressive 485,000 rise in employment for December, with native-born a.k.a. American workers enjoying most of the gain.

In December:

  • Total employment rose 485,000, up by 0.3%
  • Native-born American employment rose by 461,000, up by 0.4%
  • Foreign-born employment rose by 24,000 – up by 0.1%

While American workers caught a welcome break last month, the immigrant share of the total employment remains high by historical standards. November, you may recall, saw the highest immigrant share of total employment since the Obama Administration took office.

American workers have lost ground to their immigrant competitors throughout the Obama years. We highlight this trend in our New American Worker Displacement Index (NVDAWDI) graphic:

Native-born American employment growth is the black line, immigrant employment growth is in pink, and NVAWDI—the ratio of immigrant to native-born American job growth—is in yellow. The index starts at 100.0 in January 2009 for both immigrants and native-born Americans, and tracks their employment growth since then.

From January 2009 to December 2015:

  • Foreign-born employment rose by 3.818 million, up 17.6%. The immigrant employment index rose from 100.0 to 117.6.
  • Native-born American employment rose by 3.890 million or by 3.2%. The native-born American employment index rose from 100.0 to 103.2
  • NVDAWDI (the ratio of immigrant to native-born employment growth indexes) rose from 100.0 to 114.0. (100X(117.6/103.2)

Immigrant employment has risen 5.5-times faster than native-born American employment (17.6% versus 3.2%) during the Obama years. In many unskilled occupations, the job growth gap is far larger, owing to the disproportionate number of immigrant workers.

The foreign-born share of total U.S. employment has risen steadily, albeit erratically, throughout the Obama years:

In February 2009, President Obama’s first full month in office, 14.97% of all persons working in the U.S. were foreign-born. In December the foreign-born share was 16.98%. That is down slightly from 17.02% in November, but above every other month in 2015.

In only three of the 84 months of Obama’s Presidency have immigrant workers accounted for a greater share of U.S. employment than they did last month.

December’s immigrant employment share was 2.01 percentage points above the level recorded at the start of Mr. Obama’s administration. With total employment now approaching 150 million, each percentage point translates to 1.5 million workers.

This implies that Obama-era immigration may have pushed as many as 3.02 million (1.5 million times 2.01) native-born Americans onto the unemployment rolls.

A detailed snapshot of American worker displacement over the past year is seen in the “Employment Status of the civilian population by nativity” table published in the monthly BLS report:

Employment Status by Nativity, Dec. 2014-Dec. 2015

(numbers in 1000s; not seasonally adjusted)

  Dec-14 Dec-15 Change % Change
  Foreign born, 16 years and older
Civilian population 39,896 40,737 841 2.1%
Civilian labor force 26,286 26,681 395 1.5%
Participation rate (%) 65.9% 65.5% -0.4 %pts. -0.6%
Employed 24,890 25,426 536 2.2%
Employment/population % 62.4% 62.4% 0.0 %pts. 0.0%
Unemployed 1,396 1,255 -141 -10.1%
Unemployment rate (%) 5.3% 4.7% -0.6 %pts. -11.3%
Not in labor force 13,610 14,056 446 3.3%
  Native born, 16 years and older
Civilian population 209,131 211,199 2,068 1.0%
Civilian labor force 129,235 130,564 1,329 1.0%
Participation rate (%) 61.8% 61.8% 0.0 %pts. 0.0%
Employed 122,300 124,277 1,977 1.6%
Employment/population % 58.5% 58.8% 0.3 %pts. 0.5%
Unemployed 6,936 6,287 -649 -9.4%
Unemployment rate (%) 5.4% 4.8% -0.6 %pts. -11.1%
Not in labor force 79,896 80,635 739 0.9%
Source: BLS, The Employment Situation - December 2015, Table A-7, January 8, 2016. PDF

From December 2014 to December 2015:

  • Foreign-born employment rose by 536,000 – a 2.2% increase - while native-born employment rose by 1,977,000 – up by 1.6%. Advantage immigrants
  • Labor-force participation (LFP) rates – a sign of worker confidence -fell for foreign-born workers and remained unchanged for native-born; at 65.5%, however, the immigrant LFP is still well above that of natives, 61.8%. Advantage immigrants
  • Unemployment rates fell for both foreign-born and native-born; at 4.7%., the seasonally adjusted unemployment rate for immigrants is 0.1 percentage point below the comparable rate for native-born. Advantage immigrants

Overarching everything is the wide gap in population growth rates. Over the past 12 months the number of working age immigrants increased by 2.1%, while the comparable native-born population grew 1.0%.

Absent a radical change in immigration policy, this portends continued wage stagnation for American workers.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants.

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