I’m wondering if healthcare will stop being a job producer as the OBBB cuts start hitting the sector? I’ve read that a total collapse of rural healthcare in particular is possible. Your thoughts?
Well, the cuts certainly don't help, esp., as you say, in rural areas. But the thing with health care is that, unless we're talking "tummy tucks," it's inelastically demanded, so these budget cuts tend not to cut spending so much as move it from public to private sources. So, given that all this healthcare job creating is driven in part by demographics--boomers--I think that part of the job machine is more likely to keep humming.
This is what a low hire/no fire jobs market looks like in today’s March job report. The hiring rate in February sunk to a low last reached in 2020. Surveys by the National Federation of Independent Business have shown that only 12% plan to add jobs in the next three months.
Consistent with that frozen picture, average hourly earnings grew only 3.5 percent in March from a year ago, the slowest pace since 2021 and only slightly faster than inflation.
At the same time, layoffs have remained extremely low, as companies have sought to retain talent rather than let people go only to rehire them later. The average workweek shortened to 34.2 hours, indicating that employers are cutting hours rather than head count.
The typical person switching jobs now sees wage growth of 4.4%, down from 7.7% three years ago, according to the Atlanta Fed.
The U6 numbers are distorted as well at 8%. My concern is the number of people who have dropped off the roles completely alongside the increase in subprime default rates.
Add in Private Credit making rumblings and I wonder how over-leveraged Wealth Effect individuals may need to cash-out to make margins.
It turns out that Heisenberg’s Uncertainty Principle applies to employment figures as well as String Theory. You can have data quickly or you can have data accurately, but you can’t have both.
Thanks for the graph on percent changes in wages for blue-collar and non-managers in services. It shows a clear downward trend. I'm curious which employment sectors, if any, have been paving a positive trend in percent wage and salary? Where are the disparities, if any, in changes in wages and salaries?
U Michigan Consumer Sentiment Index was 53.3 in March, down from 56.6 in February. I can just imagine what the April score will look like. But a couple of technical questions: how robust is the Michigan index in predicting future (next-month) employment figures? And, how meaningful are measures of average wages if job loss is concentrated in entry-level positions or low-end service industries?
Because the signal-to-noise ratio is quite low in these monthly job reports, no one does a great job in forecasting them.
But also, in recent years, a large gap has opened up between the UMich sentiment index and most economic indicators. Back when I was in the Biden admin, we had many months of strong job gains, but people were so bugged by price/affordability issues, that the usual correlations broke down. They called it a vibecession.
While surveys of consumer sentiment (Conference Board and U Michigan) showed a significant decline from 2024 through 2025, it doesn't square with reported growth in real wages — 1.0% in 2024 vs 1.1% in 2025. Or does it?
The Federal Reserve's preferred measure of wages and salaries, the BLS Employment Cost Index (ECI) for civilian workers, showed nominal wages and salaries up 3.3% for the 12 months ending December 2025. Meanwhile Average Hourly Earnings (AHE) came in at ~3.8% — a 50-basis point gap. That's meaningful.
The ECI's design explicitly strips out the compositional shift problem: it produces a pure cost change free from the effects of workers moving between occupations and industries. So the AHE premium over ECI in 2025 is likely a composition artifact — perhaps related to out-migration, or high-wage-professional, AI-adjacent, and healthcare upward salary pressures.
For comparison: the ECI for the 12 months ending December 2024 registered 3.8% for nominal wages and salaries — so ECI decelerated from 3.8% in 2024 to 3.3% in 2025, while AHE remained relatively flat.
On the BLS's own real wage calculation using ECI
The BLS itself reported inflation-adjusted (constant dollar) wages and salaries increased just 0.7% for the 12 months ending December 2025 — and that's using CPI as the deflator. If we substitute the Fed's preferred measure of inflation, the Personal Consumption Expenditure (PCE) at 2.9% (vs CPI's 2.6%), you're in a 0.4% real earnings ballpark — a material downgrade from the "1.1% real wage growth" figures circulating.
There appear to be three compounding distortions pulling in the same direction:
PCE — the Fed's own measure — shows 30 bps more inflation than CPI: 2.9% vs 2.6%
Each individually is modest. Together they turn a 1.1% real wage figure into something closer to 0.4% using the two measures the Fed actually trusts. That's not a rounding error — it's the difference between "workers are clearly ahead of inflation" and "workers are barely treading water."
Using ECI adjusted by PCE, real wages drop from 1.2% in 2024 to 0.4% in 2025.
What this suggests about the consumer sentiment surveys
The Conference Board and Michigan surveys aren't just picking up vibes. If actual purchasing power was only growing ~0.4% in 2025 rather than 1.1%, consumers were experiencing something much closer to stagnation — and they'd know it at the grocery store and the gas station even if the headline numbers looked better. The consumer sentiment data may be the more honest signal here.
It's worth adding that healthcare benefits alone were up 5.8% year-over-year by mid-2025, approaching levels not seen in 20 years — a cost borne partly by employees through higher premiums and cost-sharing, which wouldn't show up cleanly in any of the wage measures but absolutely shows up in household budgets.
Data sources: BLS Employment Cost Index (Q4 2025), BLS Average Hourly Earnings, BEA Personal Consumption Expenditure deflator, BLS CPI-U. Consumer sentiment: Conference Board Consumer Confidence Index, University of Michigan Survey of Consumers.
Yes, the octopus economist, many hands and a really “noisy” list of datasets. With the “magnificent seven” driving the market and the smart guys/gals benefiting, namely buying and selling puts and calls, it’s dog paddle time.
I’m wondering if healthcare will stop being a job producer as the OBBB cuts start hitting the sector? I’ve read that a total collapse of rural healthcare in particular is possible. Your thoughts?
Well, the cuts certainly don't help, esp., as you say, in rural areas. But the thing with health care is that, unless we're talking "tummy tucks," it's inelastically demanded, so these budget cuts tend not to cut spending so much as move it from public to private sources. So, given that all this healthcare job creating is driven in part by demographics--boomers--I think that part of the job machine is more likely to keep humming.
This is what a low hire/no fire jobs market looks like in today’s March job report. The hiring rate in February sunk to a low last reached in 2020. Surveys by the National Federation of Independent Business have shown that only 12% plan to add jobs in the next three months.
Consistent with that frozen picture, average hourly earnings grew only 3.5 percent in March from a year ago, the slowest pace since 2021 and only slightly faster than inflation.
At the same time, layoffs have remained extremely low, as companies have sought to retain talent rather than let people go only to rehire them later. The average workweek shortened to 34.2 hours, indicating that employers are cutting hours rather than head count.
The typical person switching jobs now sees wage growth of 4.4%, down from 7.7% three years ago, according to the Atlanta Fed.
The U6 numbers are distorted as well at 8%. My concern is the number of people who have dropped off the roles completely alongside the increase in subprime default rates.
Add in Private Credit making rumblings and I wonder how over-leveraged Wealth Effect individuals may need to cash-out to make margins.
It turns out that Heisenberg’s Uncertainty Principle applies to employment figures as well as String Theory. You can have data quickly or you can have data accurately, but you can’t have both.
Sequential Reasoning Distortions... amsuingly enough I wrote about it 2 weeks ago.
https://larydoe.substack.com/p/its-always-been-an-e-shaped-economy?utm_campaign=post-expanded-share&utm_medium=web
I’m usually good at acronyms but ‘BL not UF?’
Sorry--I've heard BLUF to mean Bottom Line, Up Front--a summary at the beginning of the piece. This one came at the end.
We agree on the destructive nature of such things, but what's the bet this figure gets downgraded once the data get better?
Thanks for the graph on percent changes in wages for blue-collar and non-managers in services. It shows a clear downward trend. I'm curious which employment sectors, if any, have been paving a positive trend in percent wage and salary? Where are the disparities, if any, in changes in wages and salaries?
U Michigan Consumer Sentiment Index was 53.3 in March, down from 56.6 in February. I can just imagine what the April score will look like. But a couple of technical questions: how robust is the Michigan index in predicting future (next-month) employment figures? And, how meaningful are measures of average wages if job loss is concentrated in entry-level positions or low-end service industries?
Because the signal-to-noise ratio is quite low in these monthly job reports, no one does a great job in forecasting them.
But also, in recent years, a large gap has opened up between the UMich sentiment index and most economic indicators. Back when I was in the Biden admin, we had many months of strong job gains, but people were so bugged by price/affordability issues, that the usual correlations broke down. They called it a vibecession.
On the ECI/AHE Divergence in 2025
While surveys of consumer sentiment (Conference Board and U Michigan) showed a significant decline from 2024 through 2025, it doesn't square with reported growth in real wages — 1.0% in 2024 vs 1.1% in 2025. Or does it?
The Federal Reserve's preferred measure of wages and salaries, the BLS Employment Cost Index (ECI) for civilian workers, showed nominal wages and salaries up 3.3% for the 12 months ending December 2025. Meanwhile Average Hourly Earnings (AHE) came in at ~3.8% — a 50-basis point gap. That's meaningful.
The ECI's design explicitly strips out the compositional shift problem: it produces a pure cost change free from the effects of workers moving between occupations and industries. So the AHE premium over ECI in 2025 is likely a composition artifact — perhaps related to out-migration, or high-wage-professional, AI-adjacent, and healthcare upward salary pressures.
For comparison: the ECI for the 12 months ending December 2024 registered 3.8% for nominal wages and salaries — so ECI decelerated from 3.8% in 2024 to 3.3% in 2025, while AHE remained relatively flat.
On the BLS's own real wage calculation using ECI
The BLS itself reported inflation-adjusted (constant dollar) wages and salaries increased just 0.7% for the 12 months ending December 2025 — and that's using CPI as the deflator. If we substitute the Fed's preferred measure of inflation, the Personal Consumption Expenditure (PCE) at 2.9% (vs CPI's 2.6%), you're in a 0.4% real earnings ballpark — a material downgrade from the "1.1% real wage growth" figures circulating.
There appear to be three compounding distortions pulling in the same direction:
AHE overstates nominal wage growth (composition inflation from migrant labor displacement + high-end professional/healthcare wage gains)
CPI understates inflation (October data gap, increased imputation reliance, possibly lagging shelter adjustments)
PCE — the Fed's own measure — shows 30 bps more inflation than CPI: 2.9% vs 2.6%
Each individually is modest. Together they turn a 1.1% real wage figure into something closer to 0.4% using the two measures the Fed actually trusts. That's not a rounding error — it's the difference between "workers are clearly ahead of inflation" and "workers are barely treading water."
Using ECI adjusted by PCE, real wages drop from 1.2% in 2024 to 0.4% in 2025.
What this suggests about the consumer sentiment surveys
The Conference Board and Michigan surveys aren't just picking up vibes. If actual purchasing power was only growing ~0.4% in 2025 rather than 1.1%, consumers were experiencing something much closer to stagnation — and they'd know it at the grocery store and the gas station even if the headline numbers looked better. The consumer sentiment data may be the more honest signal here.
It's worth adding that healthcare benefits alone were up 5.8% year-over-year by mid-2025, approaching levels not seen in 20 years — a cost borne partly by employees through higher premiums and cost-sharing, which wouldn't show up cleanly in any of the wage measures but absolutely shows up in household budgets.
Data sources: BLS Employment Cost Index (Q4 2025), BLS Average Hourly Earnings, BEA Personal Consumption Expenditure deflator, BLS CPI-U. Consumer sentiment: Conference Board Consumer Confidence Index, University of Michigan Survey of Consumers.
Yes, the octopus economist, many hands and a really “noisy” list of datasets. With the “magnificent seven” driving the market and the smart guys/gals benefiting, namely buying and selling puts and calls, it’s dog paddle time.
How loudly will Trump shout these numbers from housetops? VERY LOUDLY!!!
How long will he keep it up? Till early May.