Economists React to Jobs Data
Employers added 110,000 jobs to U.S. nonfarm payrolls last month, the Labor Department reported Friday, a gain that was about 50% short of the gains that most Wall Street economists expected. At the same time, the unemployment rate dipped to 5.2% from 5.4%. What happened? Below, a selection of economists offer analysis of the numbers, and what they expect them to mean for the broader economy in the weeks and months ahead:
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Reported payroll growth is volatile month to month, but the results of the March report and the increase in jobless claims since the week of the survey indicate that business has slowed down hiring recently, probably in response to much higher energy prices. At the same time, the decline in the average unemployment rate in the first quarter is a reminder that recent job growth, while less than expected, is large enough to allow the unemployment rate to drift lower.
-- Bethany Baldino, J.P. Morgan~~~~~
This weaker than expected outcome, reinforced by weakness in hours, indicates that the economy is continuing to meet is production needs with stronger productivity. … Strong productivity growth will continue to restrain inflation. The contradictory performance of the two key employment surveys could deprive the Fed of the confidence it would need to alter its current pace of adjusting policy.
-- David H. Resler and Gerald Zukowski, Nomura Securities International~~~~~
In contrast to some past reports, weather-related factors do not appear to have played a major role in March. Construction jobs rose 26,000 -- right in line with the underlying trend experienced over the past year or so. Moreover, the "not at work due to bad weather" component of the household survey came in at 170,000 only slightly above the March average of 150,000 seen over the prior three years.
-- David Greenlaw and Ted Wieseman, Morgan Stanley~~~~~
Hourly earnings are having trouble gaining traction, suggesting that labor markets are not particularly tight. Faster job creation is necessary to generate the faster earnings growth that is needed to sustain real consumer spending. However, businesses still remain cautious, evidenced by a steady workweek at a relatively short level. Total hours worked in Q1 are only moderately above Q4's level, indicating that labor productivity accelerated in Q1.
-- Steven Wood, Insight Economics~~~~~
Wage gains picked up a bit, helping push up weekly earnings. But before we start thinking wage inflation is accelerating we need to see a few more months of 0.3% increases before anyone, including the Fed, would get really worried.
-- Joel L. Naroff, Naroff Economic Advisers~~~~~
This is disappointing but it does not change the underlying picture of an improving labor market. … Note that the drop in the unemployment rate appears "genuine," in the sense that the 332,000 drop in unemployment was exceeded by the 357,000 rise in employment; in other words, the drop in the unemployment rate was not because people dropped out of the labor force.
-- Ian Shepherdson, High Frequency Economics
As always, interesting stuff.
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Economists React
April 1, 2005 12:45 p.m.
http://online.wsj.com/article/0,,SB111237153413995566,00.html
Saturday, April 02, 2005 | 09:02 AM | Permalink
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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=648682
The Growth of U.S. Executive Pay
LUCIAN ARYE BEBCHUK
Harvard University
YANIV GRINSTEIN
Cornell University
Abstract:
This paper examines both empirically and theoretically the growth of U.S. executive pay during the period 1993-2003. During this period, pay has grown much beyond the increase that could be explained by changes in firm size, performance and industry classification. Had the relationship of compensation to size, performance and industry classification remained the same in 2003 as it was in 1993, mean compensation in 2003 would have been only about half of its actual size. During the 1993-2003 period, equity-based compensation has increased considerably in both new economy and old economy firms, but this growth has not been accompanied by a substitution effect, i.e., a reduction in non-equity compensation. The aggregate compensation paid by public companies to their top-five executives during the considered period has added up to about $290 billion, and the ratio of aggregate top-five compensation to profits increased from 4.8% in 1993-1995 to 10.3% in 2001-2003. After presenting evidence about the growth of pay, we discuss alternative explanations for it. We examine how this growth could be explained under either the arm’s length bargaining model of executive compensation or the managerial power model. Among other things, we discuss the relevance of the parallel rise in market capitalizations and in the use of equity-based compensation.
Posted by: anne | Apr 2, 2005 10:15:30 AM
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