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“You’re likely to see a continuation of ‘negative’ real wage growth”

On Friday’s show of CNBC’s “Squawk Box,” University of Chicago Booth School of Business economics professor Austan Goolsbee, who served as chairman of the Council of Economic Advisers under President Barack Obama , welcomed the number of jobs added in July, but pointed out that if GDP is falling at the same time that a large number of jobs are being added, “it must mean that productivity is falling”, and we will probably see “a continuation of this kind of negative real wage growth”.

Goolsbee said, “I mean, that’s a jaw-dropping number. There’s never been a time when we’ve brought the unemployment rate this low, where we’ve added 500,000 jobs. I mean, I thought, given all the rate increases, we’d probably have a disappointment or a failure. You will never hear me criticize a number of jobs where we got half a million jobs. I would point out that there are two areas, not of weakness, but of danger. The first is that if GDP goes down when you create jobs at this rate, that must mean productivity goes down, and if productivity goes down, what that will mean for wages is not great. And so you’re probably going to see a continuation of this kind of negative real wage growth. But the second thing is that it’s fundamentally not stable. There are not enough people to continue creating 500,000 jobs per month. So on a fairly quick command it’s – it has to stop. We have to reach what is de facto full employment, and then the numbers won’t be as big. And so, people can’t be surprised when this happens.

Follow Ian Hanchett on Twitter @IanHanchett

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