We can thank bubblevision and the Maestro himself for a splendid reminder today that Greenspanian central banking is the greatest menace to capitalist prosperity ever invented. This was made abundantly clear by his pronouncement on CNBC regarding the current labor market:
“Tightest labor market I’ve ever seen.” – Greenspan on
@CNBC
As an empirical matter, of course, that’s rank nonsense – and is among the stupidest quips the Maestro has ever uttered. That’s because the law of supply and demand dictates that if the labor market is actually the tightest since Greenspan began his career in the 1950s, wage rates should also be rising at the highest rate ever.
In fact, at 2.8% year-year-over year for September 2018, nominal wage growth (red line) is the lowest it’s been since the late 1960s; and in real terms, the story is even worse.
To wit, between 1955 and 2000, real compensation per hour grew at a 1.75% annual rate – and that’s the average across seven business cycle, including recession years.
By contrast, we are now at the top of the second longest business expansion in history, and real compensation (purple line) was up just 0.7% over the past 12 months. And that’s virtually the weakest late cycle growth rate on record.
In short, the only valid free market measure of “tight” is the price of labor, and those limpid wage rates say absolutely not.
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Of course, what the Maestro and his Keynesian fellow travelers refer to is not the verdict of the marketplace, but bureaucratic guesstimates about labor market conditions published monthly by the BLS. Yet it doesn’t take even 10 minutes worth of…