In October 2017, the U.S. economy added 261,000 non-farm jobs, according to the latest employment report by the Bureau of Labor Statistics. The unemployment rate dropped slightly to 4.1% from 4.2% in the previous month. The sectors with the most job gains included food services and drinking paces (+89,000), professional and business services (+50,000), manufacturing (+24,000), and healthcare (+22,000).
An area of weakness from the report was wages. Over the past 12 months, average hourly earnings have increased by 63 cents or 2.4%. In October 2017, however, they fell one cent (after rising by 12 cents in September).
“Historically, when the unemployment rate has been this low, we expect to see higher wage growth than we have in 2017, and we’d like to see that number going up. Another thing that I think is a factor is the participation rates of youngest cohort – we’d really like to see that part of the labor market be competitive. If we have competition in the lowest part, that starts to drive up wages for everyone.” ~Cathy Barrera, Chief Economist at ZipRecruiter
Blue-Collar Wage Growth
While the American economy and the stock market have been healthy and employment is low, wages have been stagnant since the 1970s. The Economist in a recent issue reported that median household income is actually up in the last three years, but Indeed.com’s chief economist Jed Kolko reported that there have been “no real wage gains for workers” for two years now. So what’s really going on? Well, Kolko clarified that wages are in fact up and accelerating, but this is specifically for “lower-wage jobs and for people with less education” and meanwhile the overall income picture remains flat. On the other hand, this quarter jobs in transportation, construction and mining show wages up by 3-4%.
Since the end of the recession in June 2009, wages and salaries have grown only 8.7%, while prices have increased by 9.5%. Recently, though blue-collar wages have begun to increase. In the year to date (till third quarter), blue-collar pay growth has exceeded 4%. As employment has fallen (from above 6% in mid-2014 to 4.1% today), wage growth has gradually been picking up. The Economist suggests that strong demand, rather tan a productivity boom, is driving the search for workers as a weaker dollar and a strengthening world economy have driven demand for American goods. In the first three quarters of 2017, goods experts were up nearly 4% compared to the previous year.
The Economist suggests that rising incomes for lower- and middle-earners may help to reduce inequality, especially if wage growth for higher-earners continues to be stagnant. A recent analysis by the Economic Policy Institute found that real wages for the top 1% of earners fell by 3.1% in 2016, and were lower that year than they were in 2007.