Stronger Than Expected Jobs Creation But CNBC Reports “Trouble Lurked”
CNBC, the nation’s No. 1-rated TV financial channel, reported that the news on jobs was good but ominously added, “Beneath the surface, though, trouble lurked.”
“The economy added 222,000 in June but wage growth remains muted at just 2.5% annually,” according to CNBC. “Even a 4.4% unemployment rate hasn’t been able to put pressure on salaries, which are growing at just a 2.5% rate annually.”
Trouble is, those figures are not real.
The U.S. economy created 222,000 new jobs in June – 25% more than expected, and the unemployment rate was 4.4%, according to data released Friday by the U.S. Bureau of Labor Statistics.
While the jobs recovery is one of the longest on record and the employment rate has not been so low in about 15 years, major financial news outlets found a way to dampen enthusiasm about the good news by covering it inaccurately.
The wage gains figures referenced by CNBC are before inflation.
CNBC reports accurately that average hourly earnings rose just two-tenths of 1% in June and it was a 2.5% gain from a year earlier, but the financial network’s coverage concluded incorrectly that wage gains have remained persistently weak because they are not looking at after-inflation figures.
After-inflation “real” average hourly earnings are significantly higher than they were in 2014, and real figures are what matters most when examining the purchasing power of consumers. With the inflation rate less than 2%, for much of the past year, average hourly earnings rose 1% over the level 12 months earlier in real after-inflation terms.
The stock market did not seem to notice that CNBC said that wage gains are a “giant problem.”
The Standard & Poor’s 500 index closed on Friday at 2425.18, about 1% off its all-time high, reached on June 19. Prices were basically flat for the week.
A change in sentiment or unexpected negative news could trigger a 10% or 15% plunge at any time. However, the outlook for the fundamentals that drive stock prices – including real wages, consumer spending, and inflation – remains bright for the rest of 2017 and 2018. Stocks could continue to rise without any real bad surprises.