Weekly Economic Update November 6 – November 10, 2017

November 06, 2017

CHART OF THE WEEK

Workers Have Less to Work With Than Before the Recession

The chart shows how the amount of capital—tools, equipment, and structures—available per hour worked, or “capital deepening,” in the United States has risen over time until 2009. Had private capital investment returned to trend after the 2008-09 recession, workers would have had over 13% more capital per hour to work with in 2016.

Last week’s chart showed that business shifted investment overseas as foreign tax rates declined. Less domestic investment means less capital for U.S. workers, which leads to slower productivity growth, which leads to slower wage growth. The President’s Council of Economic Advisers Chairman, Kevin Hassett, discusses the relationship between capital deepening, tax reform, and wage growth in a short video interview.

LAST WEEK

News & Commentary Weekly Highlights

Wall Street Journal: Hiring Rebounded in October, Unemployment Rate Fell to 4.1%

Alt-M: Trump Taps Jerome Powell to Chair Fed

Tax Foundation: Tax Cuts and Jobs Act Would Substantially Improve the U.S.’s International Tax Competitiveness

Economics21: Tax Reform Needed for Continued High GDP Growth

Wall Street Journal: Bank of England Raises Interest Rates for First Time in a Decade

JEC Releases

Tiberi Statement on October Jobs Report

October 2017 Jobs Review

Tiberi Statement On Fed Chair Nomination

Jerome Powell: A Brief Introduction

November 2017 FOMC Review

Tax Reform Will Strengthen Economy, Increase Wages and Opportunity

End of Days to Follow End of Cost Sharing Reduction Subsidies?

Top Economic Indicator Highlights

Personal Consumption Expenditures (PCE) Deflator (September 2017; percentage changes from same month last year)

Category	September	August	July
Headline PCE Deflator	1.63%	1.44%	1.41%
Core PCE Deflator (excludes food and energy)	1.33%	1.30%	1.42%

Noteworthy: The Fed’s main inflation indicator increased to 1.63% this month, likely because hurricanes Harvey and Irma drove up energy prices temporarily. The “core” inflation measure, which excludes volatile food and energy prices, ticked up slightly to 1.33%.

Productivity and Costs (Q3-2017, seasonally adjusted at annualized growth rates, preliminary estimate)

Increasing productivity growth is essential for living standards to improve. Before 2008 nonfarm business labor productivity growth averaged 2.4%; from 2008 to date, it has averaged only 1.2%.

Category	Q3-2017	Q2-2017	Q1-2017
Nonfarm Business Labor Productivity	3.0%	1.5%	0.1%

Noteworthy: Nonfarm business labor productivity growth hit 3% for the first time since the third quarter of 2014.

Employment Situation (October 2017)

Category	October	September	August
Nonfarm payroll jobs (thousands)	261	18	208
Headline unemployment rate (U-3)	4.1%	4.2%	4.4%
“True” unemployment rate (U-6)	7.9%	8.3%	8.6%

Noteworthy: In September, employees who did not work during the week due to Hurricane Irma were not counted as employed by BLS’s survey of business payrolls. As employees have returned to payrolls again, the October jobs number swelled. The headline unemployment rate (U-3) is the lowest since December 2000 and the “real” unemployment rate (U-6) is at its lowest since December 2006.