‘You Probably Are Going to See a Continuation of’ ‘Negative Real Wage Growth’

On Friday’s broadcast of CNBC’s “Squawk Box,” Economics Professor at the University of Chicago Booth School of Business Austan Goolsbee, who served as Chairman of the Council of Economic Advisers under President Barack Obama, praised the number of jobs added in July, but pointed out that if GDP is declining at the same time a large number of jobs are being added, “it has to mean that productivity’s going down,” and we will likely “see a continuation of this kind of negative real wage growth.”

Goolsbee said, “I mean, this is a jaw-dropping number. There has never been a time when we got the unemployment rate down this low, where we’re adding 500,000 jobs. I mean, I thought that, given all of the rate increases, that we would probably have a disappointment or a miss. You’re never going to hear me criticize a jobs number where we got a half-a-million jobs. I would highlight there are two areas of, not weakness, but danger. The first is, if you’ve got GDP shrinking when you’re adding jobs at this kind of rate, it has to mean that productivity’s going down, and if productivity’s going down, what that’s going to imply for wages is not great. And so, you probably are going to see a continuation of this kind of negative real wage growth. But the second thing is this is fundamentally not stable. There are not enough people to keep adding 500,000 jobs a month. So, on a pretty rapid order, that’s — it has to stop. We have to reach what is a de facto full employment, and then the numbers are not going to be as big. And so, people can’t be surprised when that happens.”