Wage Gains ‘Have Hit A Wall & That’s Not Good News’ For America’s Workers
The U.S. economy showed off its muscles in June with a big snapback in hiring, but wage gains for Workers have suddenly turned flabby and threaten to cap economic growth.
The economy produced a lusty 224,000 new jobs last month, easing worries after a paltry 72,000 increase in May. While hourly pay grew slightly in June, the increase in wages over the past year remained stuck at 3.1%. Yearly wage gains hit a post-recession peak of 3.4% in February before tapering off.
“At a time when the ‘historically tight’ Labor Market ‘should be translating into higher wages for Workers, decelerating wage gains remain the black spot,’” Senior Economist Daniel Zhao of Glassdoor said.
Wages grew around 2% a year throughout most of the 10-year-old expansion until ratcheting up in the past several years to just above 3%, but that’s still well shy of the 4% rate that often prevails at the height of a boom.
Economists have offered lots of theories as to why pay gains have remained mild despite the lowest unemployment rate and fewest layoffs in almost 50 years: Workers still have scars from the deep 2007-2009 recession and they are competing in a Global Labor Market that constrains wages. Companies have little reason to boost pay when productivity is low and it’s hard to raise prices and Workers themselves prefer improved benefits such as more flexible work arrangements.
Whatever the case, slow wage growth suggests the U.S. economy hasn’t fully healed even after a record expansion.
“The ‘lack of acceleration in wage growth suggests that this recovery is still incomplete,”’ said Martha Gimbel, Indeed Hiring Lab’s Director of Economic Research. “This is an ‘important reminder that there are still Workers who have not fully benefited from this recovery.’”
That mixed picture on jobs is one reason why the Federal Reserve is still expected to cut interest rates at its next meeting.
The yield on the two-year Treasury spiked after the jobs data - but still is suggestive of lower interest rates.
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