For all of last year, and much of the year before, I noted that, whilst bourgeois pundits were proclaiming that rises in US employment were about to slow down or end, as they desperately hoped for such an event, in order to restrain the rise in wages, no such slow down was likely. So it turned out. Indeed, it was not just in the US where that was the case. Despite uneven growth across the globe, even in the places where growth was, sluggish, as in the UK, and EU, employment continued to grow, and labour shortages increased.
Speculators latched on to every straw of hope that employment growth was weakening, to bring the required break on wages, so as to enable profits to grow without the need for additional liquidity to facilitate higher prices, with a consequent rise in interest rates, which continue to threaten a new fall in asset prices (fictitious capital), the form of wealth of the ruling class. But, every dawn turned out to be a false one. True, when the annual revisions to US Non-Farm Payrolls were released they showed that the actual figures were around 700,000 less than had been recorded. However, even allowing for that, it remains the case that US employment has risen considerably, way in excess of what is required to absorb the normal increase in the working population.
For last year, the revised data shows a rise in employment of 1.99 million, as against the originally stated figure of 2.2 million. The average monthly increase of 166,000 compares with an average monthly rise in the workforce of around 90,000. So, the US labour market continues to tighten, and that has been shown, also, in the wage data. Last month, average hourly earnings rose by 0.5% compared to the previous month, as against estimates of a 0.3% rise. If continued at that pace, it is equal to a rise of more than 6%, for a year, despite the fact that consumer price rises are running at 3%. Its not just in the US that the gradual fall in the rate of consumer price rises, has not resulted in a corresponding fall in wage rises. Despite being told that workers faced a huge squeeze on real wages, in the UK, the opposite has been true. Last month (December), UK CPI was just 2.5%, (3% in January 2025), whilst the rise in wages, over the last three months of 2024, was 6%. In the Eurozone, wages have risen by 4.4%, whilst CPI was 2.5%.
Back to the US, the attempts to look for weakness in the labour market turned again to other data such as Job Openings, and Quits, the number of workers voluntarily leaving their existing job to move to another, better paid job, as well as the number of hours worked. Job openings stand at just over 7 million, which is down from the figure of nearly 9 million at the start of 2024, and the all-time high of over 12 million in 2022. However, the average over the last 25 years is only 5.5 million, meaning that, today's, level is 50% higher than the average, over that period. Turning to Quits, they are down to 2%, from a high of 3% in November 2021. But, again, they are currently only at the average level over the last 25 years. Moreover, I have set out, previously what this signifies at this stage of the cycle.
When the long wave cycle turns to a period of extensive accumulation, as happened from around 1999, it first manifests as an increase in employment that soaks up existing labour reserves, including using existing employed workers more extensively and intensively. They get offered overtime, and so on. Unemployment falls, as those workers are drawn into employment. Part-time and casual workers get full-time, permanent work. At first, none of this translates directly into stronger workplace organisation, and ability to demand higher wages. But, increasingly, workers are able to act on an individual basis to find better paid employment. So, for example, although its been seen that the average pay rise for workers staying in the same job, in the private sector was around 7%, the average increase in pay for workers who move to another job has been around 14%. Employers have had to compete for labour by bidding up wages to attract them.
But, that difference between the wage rises given to workers staying in the same job, and that for workers moving jobs has declined, as increasingly, not only have employers had to raise wages to stop their workers leaving, but also, as workers have become stronger, as labour shortages arose, so they have begun to rebuild their organisations in the workplace. Existing unionised workers have become stronger, and un-unionised workplaces have been unionised. The emphasis has shifted from individual solutions to collective solutions, as workers have stayed in their jobs, and simply demanded higher pay. That is what always happens, as workers become stronger, and on that basis, the Quits Rate always then falls.
Again, as I have set out elsewhere, the consequence of labour reserves being drawn down, as unemployed workers are employed, part-time and casual workers get full-time permanent work, and so on, the result is that household incomes, as against individual incomes, rise. The majority of households are still, multi-occupancy households, comprising couples, and children. The relevant metric is not, then, individual incomes, let alone hourly wages, but total household income. A household with two people working, rather than one, can more easily cover the rent, or mortgage payments, and other such fixed costs, such as energy bills etc. So, that leaves additional income to use for spending. That is one reason that consumer spending has continually exceeded expectations, and as that spending has continued to rise, it, in turn, leads businesses to seek to meet that increasing demand, by their own further capital accumulation, which in turn, means additional employment of workers. This is what always happens in this phase of the cycle, even though attempts (austerity, tariffs, lockdowns), since 2010, to slow down economic growth have meant that it has been muted.
In the UK, a narrative was attempted following Blue Labour's Budget, and the rise in Employers' NI, to argue that it would result in a slow down, or even fall in employment, as firms cut off their nose to spite their face, by laying off, or failing to employ additional workers, thereby, denying themselves the ability to increase their output and profits, solely to save a few quid in NI contributions. The narrative was nonsense, and the data confirms it. Employment continued to rise into the end of the year, and the rate of employment also rose. At the same time, the number of unemployed fell slightly, with the unemployment rate remaining at 4.4%. Meanwhile, the rise in wages by 6%, was itself, an indication of the continuing tight labour market.
In the US, it was claimed by some pundits that the large rise in average hourly earnings was due to a fall in the number of average hours worked. This latter is also touted as an indication of some supposed weakening in the labour market. But, again, this is also what is seen at this phase of the long wave cycle, and far from suggesting a weakening it indicates the opposite. The initial rise in working time that accompanies the start of the long wave uptrend, is what indicates the continued weakness of labour. In the 1950's, for example, workers could be fobbed off with the offer of additional overtime, rather than a rise in their hourly wage. But, by the 1960's, workers felt strong enough to demand not only higher hourly wages, but shorter working hours, more holidays and so on. That is what is being seen now, and over time, it tightens labour markets even further.
There is another aspect of this too. Since the 1980's, the size of the petty-bourgeoisie has grown by 50%. The capital of the petty-bourgeoisie is, by definition, less productive. It does not enjoy economies of scale and so on. Similarly, the labour is less productive. As the long wave uptrend continues, the long-term historical process by which capital is centralised and concentrated, and the petty-bourgeoisie is liquidated, asserts itself. The capital and labour, previously tied up in these inefficient small businesses gets flushed out, and concentrated into larger-scale businesses. Consequently, from this alone, productivity rises, so that output rises with less labour required for it. Generally speaking, the incomes of those flushed out of those small, inefficient businesses, rise, when they become wage-labourers in some larger business.
So, in the US, more clearly than anywhere else, currently, employment continues to rise, real wages are also rising, and those increases in real wages, specifically, real household incomes, facilitates a continued rise in the demand for wage goods and services, which competition drives capital to respond to by a continued accumulation of capital. Rising real wages, with flat levels of productivity growth, again consistent with this phase of the long wave cycle, mean a rise in relative wages, and fall in relative profits. To compensate, firms seek to raise prices, so as to maintain profit margins. To an extent they can do so, because of the role of commercial credit in providing additional liquidity, even without additional liquidity from the central bank. But, those rising prices then simply lead to a price-wage spiral, in conditions where labour shortages, and strengthening unions, mean that workers seek higher wages to again compensate for those higher prices. Central banks are led to, at least, stop cutting their policy rates, as again seen most clearly in the US, or to begin raising them once more. In conditions where asset markets have come to expect falling interest rates so as to push up asset prices that spells trouble for the owners of assets. At the very least, it means falling real prices of those assets, and often that is accompanied by crashes in those asset prices, as happened in 2008.
On Bloomberg the other day, I heard one anchor ask a guest how the US housing market was going to deal with mortgage rates that are now around 7%. But, the reality is that the average US 30 Year Mortgage Rate, between 1971 and today, is 7.73%. Current mortgage rates, in the US and UK, are not high by historical standards, but just about average. It is just that, over the last 40 years, they were falling, along with other market rates of interest, as the supply of money-capital exceeded the demand for it. That trend is over, and interest rates are rising, and will continue to rise for a long time. Indeed, given that the average mortgage rate over all that period is 7.73%, and for the last few decades has been significantly below that, to maintain the average, means that rates will need to be significantly above 7% for a prolonged period. In 1981, for example, the 30 Year Mortgage Rate stood at 16%.
That, of course, reflected the fact that, at that time, there was also high levels of inflation, as central banks sought to enable capital to defend profit margins from rising wages, by increasing liquidity. In addition, the US in particular printed currency (money tokens) to finance its war in Vietnam, and state spending on welfarism. But, those same conditions can be seen today. Wages are rising, and to protect profit margins, firms seek to raise prices. Across the globe, the decades of austerity used to try to slow economic growth have left the basic infrastructure crumbling, of which the state of roads, bridges, rail track and so on are testament, as well as crumbling schools, hospitals and other buildings. The state of decay is such, now, that it threatens the overall productivity of advanced economies, itself already abysmal due to the lack of investment in fixed capital, and the growth of inefficient small businesses. The advanced capitalist economies are in danger of an historic collapse, under such conditions, compared to the challenge of new developing economies that have been able to skip several stages in the development of their infrastructure, as described by the process of combined and uneven development.
To prevent it, the developed economies, in the US, EU, UK, and Japan need to engage in large scale capital spending on infrastructure, the kind of rejuvenation seen in previous periods of history, for example, when railways replaced roads and canals as the means of mass transport of people and freight. That investment will require the state to either raise taxes significantly, or to borrow extensively, or both. In the end, borrowing only acts to delay the point at which the spending, is paid for by taxes to repay the debt. In the meantime, that higher borrowing, at a time when capital itself must borrow more to finance its own capital accumulation, means rising interest rates, and falling asset prices. On top of that, we see increasing global frictions driven by economic nationalism driving demands for much higher military spending, much as happened with the Vietnam War.
Given that there is increasing hostility of populations and electorates to renewed austerity, at the same time that money is spent on such wars, and military equipment, it becomes ever harder for governments to justify higher taxes, or restraint of state spending in order to finance those military budgets. That was part of the reason for Harris' defeat as against Trump, and, now, Trump seeks to shift that spending on to Europe. But, in Europe, the Ukraine War, let alone financing a NATO War against China, is already unpopular, and more so by the day. Macron, the cheerleader for it, got smashed when he went to the polls, and is on his way out. Starmer began as massively unpopular, and has become even more hated and unpopular in just a matter of a few months. Scholtz is also on his way out, and although the CDU/CSU is likely to win the most votes, it is unlikely to be able to form a stable government. The idea that this bunch are going to replace the US in funding, and arming the war in Ukraine is a non-starter, but even to put up any kind of show, they will have to either borrow or print currency on a large scale, pushing up interest rates, and inflation, much as happened in the 1970's, but in fundamentally different economic conditions.
In the 1970's, we were at the end of the period of long wave uptrend. Capital began to respond to a shortage of labour/crisis of overproduction of capital, by engaging in a new technological revolution centred around the microchip. But, we are not at that point currently, partly because the attempts to hold back economic growth since 2010, have acted to slow down and draw out the period of uptrend. We are still at around the same stage as the early 1960's, and so with at least another decade of expansion before those crisis conditions pertain. This puts workers in the strongest position they have ever had. They need the leaders to be able to utilise that advantage.
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