I’ll give a few quick thoughts on the labor market and the economy, knowing that the release of the jobs data on Wednesday morning may make me look stupid.

Manufacturing Employment Down by 200,000 Under Trump

I have written before that the importance of manufacturing jobs is seriously overstated. Going back 50 years, manufacturing jobs carried a substantial wage premium and were far more likely to offer healthcare benefits and pensions. This is much less true today as the wage premium has largely been eliminated.

The reason is that the manufacturing sector is no longer highly unionized. While at 7.7 percent, the unionization rate is still slightly higher than the 5.9 percent rate for the private sector as a whole, this difference is not enough to matter in a noticeable way. 

Nonetheless, Donald Trump has made a big point of telling everyone that he is bringing back manufacturing jobs to America. I suppose a large share of his imaginary $18 trillion in foreign investment is in manufacturing. (In the real world, investment in factory construction fell sharply last year.) 

Anyhow, manufacturing employment has been dropping all year and was down by almost 70,000 from December 2024 to December 2025. However, the January data will include benchmark revisions which are likely to push manufacturing employment down further. My bet is that the data will show that manufacturing employment is down by close to 200,000 since Trump took office, a decline of 1.6 percent. 

Wage Growth Slows Further

Wage growth averaged close to 4.0 percent in 2023 and 2024. With inflation falling to under 3.0 percent by the second half of 2024, this translated into a pace of real wage growth of more than 1.0 percent annually. It looks as though the pace of wage growth has slowed substantially even as inflation has edged higher due to Trump’s tariffs. 

The Employment Cost Index showed average hourly compensation, which includes benefits such as health care and pensions, has risen just 3.4 percent over the last year. We’ll get new wage data with the jobs report, but it is likely to show a similar slowing.

The story is likely to be worse for people towards the bottom end of the wage distribution. Their pay had far outpaced inflation earlier in the recovery, but as the labor market has weakened, that no longer appears to be the case. 

I have been giving some thought to the issue of health care cost growth, which far exceeds the rate of health care inflation. It’s been running over 7.0 percent year-over-year, compared to healthcare inflation of close to 3.0 percent. The difference is the growth in the quantity of health care services that people receive. 

It is likely that what people pay for health care matters more to their perception of inflation than the increase in the cost of specific items, like hip surgery or the price of Prozac. Insofar as this is the case, the story on “real” wage growth may be considerably worse than most economists (myself included) generally recognize. The story is further complicated by the fact that the relevant factor for their “cost-of-living” would be their premium payments and out-of-pocket expenses, not the total cost of health care, much of which is picked up by employers or the government. 

Unemployment Due to Quits Remains Low

I seem to be among a small group, along with Alan Greenspan, who view this measure as being important. To my view, this is a great ‘voting with their feet’ story. If people are confident in their ability to get a new job, they are willing to leave a job they don’t like before they have a new job lined up. 

In the very strong labor market in 2022, this percentage peaked at just under 16.0 percent in September. It has fallen sharply since then and stood at just 11.1 percent in December. By comparison it averaged 13.1 percent in the strong but non-inflationary labor market of 2018-2019. 

High Percentage of Multiple Job-Holders

The percentage of workers who held multiple jobs hit a high for this century of 5.8 percent in November. This figure, which is not seasonally adjusted and therefore not directly comparable to prior months’ data, is likely to remain high in January. 

This measure is another voting with their feet story. In some cases, people take a second job because they have the opportunity. They see many job openings and decide they can fit a part-time job into their schedule and make a little extra money. 

That is unlikely to be the story today, when job openings and hiring are at very low levels. It is more likely that people are taking second jobs because they have to.  

Unemployment for Black Workers Remains Elevated

One of the striking features of the labor market over the last year has been the sharp rise in unemployment for Black workers, even as the unemployment rate for whites has changed little. For Black workers the unemployment rate rose from 6.1 percent in December of 2024 to 7.5 percent last month. The rise was even sharper for Black women over age 20, going from 5.4 percent to 7.3 percent. 

By contrast, the unemployment rate for whites rose by just 0.2 percentage points, going from 3.6 percent to 3.8 percent. Others can speculate on the reasons for this racial difference as well as I can, but it is striking. 

That’s it for now. Let’s hope the jobs report doesn’t get anyone fired.