Average hourly earnings in April were 3.2 percent higher than a year earlier, the ninth straight month in which growth topped 3 percent, the Labor Department reported Friday.
Other measures diverge on the exact timing and rate of increase, but not on the basic trend: Wage growth, long stuck in neutral, has at last found a higher gear.
“We’ve spent several years going, ‘Where is the wage growth? Where is the wage growth?’” said Martha Gimbel, an economist for the job-search site Indeed. “And it turns out we just had to wait a few years for the labor market to get tighter.”
Which workers are benefiting?
The recent gains are going to those who need it most. Over the past year, low-wage workers have experienced the fastest pay increases, a shift from earlier in the recovery, when wage growth was concentrated at the top.
But minimum wages are only part of the story. Ernie Tedeschi, an economist at Evercore ISI, estimates that the minimum-wage increases account for a quarter to a third of low-wage workers’ gains over the past three years. The rest is most likely a result of a tightening labor market that is forcing employers to raise pay even for workers at the bottom of the earnings ladder.
Ms. Gimbel noted that better-paying industries had experienced faster job growth in recent months, while the fastest wage growth had been in lower-paying industries. That could indicate that sectors like health care and manufacturing are snapping up workers, forcing retailers and restaurants to raise pay to compete.
Still, not everyone is benefiting equally. African-American workers have seen smaller gains over the course of the recovery, for example. And wage growth remains slow in some parts of the country that were hit especially hard by the recession.
Many economists were puzzled by the slow pace of pay increases because it looked as if a fundamental relationship had broken down.
Decades ago, economists observed that when unemployment falls, wages tend to rise, as companies are forced to offer higher pay to attract workers. Yet even as the unemployment rate fell from 10 percent in 2009 to less than 5 percent in 2016, wages rose slowly. Even now, with the unemployment rate near multidecade lows, wages are not rising as quickly as standard models suggest they should be.
The recent uptick in wage growth suggests a simpler explanation: Perhaps the job market wasn’t as good as the unemployment rate made it look.
The government’s official definition of unemployment is relatively narrow. It counts only people actively looking for work, which means it leaves out many students, stay-at-home parents or others who might like jobs if they were available. If employers have been tapping into that broader pool of potential labor, it could help explain why they haven’t been forced to raise wages faster.
It appears as if that is exactly what is happening. In recent months, more than 70 percent of people getting jobs had not been counted as unemployed the previous month. That is well above historical levels, and a sign that the strong labor market is drawing people off the sidelines.
“You look at those people who do not want a job, people who were out of the labor market due to disability, all of those people are coming back in,” said Adam Ozimek, an economist who has studied
Hiring remains strong, suggesting that companies are still able to find the workers they need, even if they have to work a bit harder to get them. Inflation is not just tame; it is actually slowing, meaning Federal Reserve policymakers are unlikely to see faster wage growth as a reason to raise interest rates, at least in the short term.
Several years ago, Mr. Ozimek discovered that with a broader definition of unemployment — lacking a job, for any reason, while in one’s prime working years — wage growth had been in line with historical expectations throughout the recovery. That relationship has held up as the job market has improved. In other words, he argued, the wage-growth “mystery” wasn’t a mystery at all.
https://www.nytimes.com/2019/05/02/...tion=click&module=Top Stories&pgtype=Homepage
graphs at link
Other measures diverge on the exact timing and rate of increase, but not on the basic trend: Wage growth, long stuck in neutral, has at last found a higher gear.
“We’ve spent several years going, ‘Where is the wage growth? Where is the wage growth?’” said Martha Gimbel, an economist for the job-search site Indeed. “And it turns out we just had to wait a few years for the labor market to get tighter.”
Which workers are benefiting?
The recent gains are going to those who need it most. Over the past year, low-wage workers have experienced the fastest pay increases, a shift from earlier in the recovery, when wage growth was concentrated at the top.
But minimum wages are only part of the story. Ernie Tedeschi, an economist at Evercore ISI, estimates that the minimum-wage increases account for a quarter to a third of low-wage workers’ gains over the past three years. The rest is most likely a result of a tightening labor market that is forcing employers to raise pay even for workers at the bottom of the earnings ladder.
Ms. Gimbel noted that better-paying industries had experienced faster job growth in recent months, while the fastest wage growth had been in lower-paying industries. That could indicate that sectors like health care and manufacturing are snapping up workers, forcing retailers and restaurants to raise pay to compete.
Still, not everyone is benefiting equally. African-American workers have seen smaller gains over the course of the recovery, for example. And wage growth remains slow in some parts of the country that were hit especially hard by the recession.
Many economists were puzzled by the slow pace of pay increases because it looked as if a fundamental relationship had broken down.
Decades ago, economists observed that when unemployment falls, wages tend to rise, as companies are forced to offer higher pay to attract workers. Yet even as the unemployment rate fell from 10 percent in 2009 to less than 5 percent in 2016, wages rose slowly. Even now, with the unemployment rate near multidecade lows, wages are not rising as quickly as standard models suggest they should be.
The recent uptick in wage growth suggests a simpler explanation: Perhaps the job market wasn’t as good as the unemployment rate made it look.
The government’s official definition of unemployment is relatively narrow. It counts only people actively looking for work, which means it leaves out many students, stay-at-home parents or others who might like jobs if they were available. If employers have been tapping into that broader pool of potential labor, it could help explain why they haven’t been forced to raise wages faster.
It appears as if that is exactly what is happening. In recent months, more than 70 percent of people getting jobs had not been counted as unemployed the previous month. That is well above historical levels, and a sign that the strong labor market is drawing people off the sidelines.
“You look at those people who do not want a job, people who were out of the labor market due to disability, all of those people are coming back in,” said Adam Ozimek, an economist who has studied
Hiring remains strong, suggesting that companies are still able to find the workers they need, even if they have to work a bit harder to get them. Inflation is not just tame; it is actually slowing, meaning Federal Reserve policymakers are unlikely to see faster wage growth as a reason to raise interest rates, at least in the short term.
Several years ago, Mr. Ozimek discovered that with a broader definition of unemployment — lacking a job, for any reason, while in one’s prime working years — wage growth had been in line with historical expectations throughout the recovery. That relationship has held up as the job market has improved. In other words, he argued, the wage-growth “mystery” wasn’t a mystery at all.
https://www.nytimes.com/2019/05/02/...tion=click&module=Top Stories&pgtype=Homepage
graphs at link
