SUMMARY
  • The U.S. Labor Market Through A Different Lens
  • Is The Yield Curve Signaling A Recession?
The U.S. economy completed eight years of business expansion last week. The jobless rate is at a cycle low and hiring conditions are favorable. But wage growth is far below levels consistent with full employment, and inflation is still below the Federal Reserve’s target level.


The June employment report published today maintains the current status: hiring is strong and wage growth continues to linger at sub-par levels. The U.S. unemployment rate edged up one notch to 4.4% in June; payroll employment increased 222,000. Hourly earnings rose 2.5% from a year ago. Employment compensation gains have hovered around this range for four of the last six months.

This has led some economists to suggest that the Phillips curve, which represents an inverse relationship between unemployment and inflation, is dead. We touched on this briefly in our mid-year musings last week. This week, we look at employment and wage trends at state and industry levels to try and breathe life into the Phillips curve.

Data for national and state labor market conditions are gathered separately. State-level unemployment rates and hourly earnings do not exactly aggregate to the national readings, but they follow one another closely.

The chart below represents the unemployment rate and year-to-year change in hourly earnings for all the 50 states in the nation.



State earnings numbers usually contain larger swings than national data partly due to larger sampling and non-sampling errors. Excluding this limitation, one would typically anticipate states with low unemployment rates to show significant wage pressures. The chart on the earlier page indicates that hourly earnings numbers are different from these expectations and support for the Phillips curve is missing.