The monthly jobs report was released Friday. What did we learn?
According to the report, the labor market rebounded in October in the wake of the hurricanes, and continues to be strong. Employers added 261,000 workers last month, and with the number of jobs added in September revised from a loss to a gain of 18,000, it represents a record 85th straight month of job growth since the great recession. There is more good news in the report as well. But there is one negative problem that stands out: wages remain stubbornly stagnant. U.S. workers simply are not getting the raises that the positive economic news would suggest are coming their way.
Let’s cover all of the good news, then discuss wages. What else was positive?
The unemployment rate continues to drop. In October, unemployment fell 0.1 percentage point to 4.1% in October, the lowest it has been since December 2000. While it was stubborn throughout 2016, the rate dropped dramatically from 4.8% at the start of this year. The unemployment rate that includes Americans who are underemployed or too discouraged to look for work fell to 7.9% in October. The last time it was lower was in 2001. As a result, new hires are harder to find, which should spur wage growth.
What did wage growth look like in this last report?
The Labor Department report showed that average hourly earnings were up 2.4% since this time last year. That is down from the 2.9% year-over-year growth rate reported in September, and significantly lower than the 3% to 3.5% annual wage growth we expect in a truly healthy economy. On top of that, when you look only at average hourly wages per month, rather than year over year comparisons, in October wages actually declined one cent to $26.53 after rising by 12 cents in September.
Now, we should take October with a grain of salt, considering the payroll impacts of the hurricanes on the service industry are partially responsible for this drop. However, the longer-term wage growth trend is certainly underperformance expectations.
What is responsible for this slow wage growth?
I think it is a combination of factors. For one, I think the gig economy and technology, and the related increase in part-time hourly workers in the economy, has scrambled some of the assumptions we used to make about the relationship between the unemployment rate and wage growth.
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SOURCE: Black America Web, Mellody Hobson