Newspaper article The Christian Science Monitor

What the New Job Numbers Don't Say

Newspaper article The Christian Science Monitor

What the New Job Numbers Don't Say

Article excerpt

The big economic news Friday was that the United States economy added 255,000 new jobs in July, more than expected.

But beyond the much-touted employment numbers was another development that offers at least a spark of hope for American workers: Wages are growing at their strongest annual pace in seven years, according the Labor Department figures.

The wage gains are still modest. Hourly earnings have risen 2.6 percent during the past year, faster than inflation but hardly robust growth.

The question now is whether the report sets the stage for stronger growth or points to a new normal of solid but unspectacular improvement.

One hopeful sign is that a bevy of high-profile companies in the past six months have raised or announced they will raise wages. Also, when employers do raise pay, some are seeing improved morale and more productivity.

But even after seven years of recovery from the Great Recession, wage gains for workers have been dismal, especially at the bottom rungs of the income ladder. Adjusted for inflation, pay for the typical middle-class worker has advanced just 5 percent in the past decade, according to separate government data.

Fundamental changes in the economy might mean that broad wage increases might simply be harder to sustain than in the past. Many economists are taking a wait-and-see attitude.

Pay inequalityIn the past, when workers became scarce, pay went up as employers began to compete for employees.

Today, workers are more scarce. There are only 1.35 unemployed workers for every job opening - a 16-year low, according to the latest government figures. The July unemployment rate stands at 4.9 percent, a level many economists say should start boosting pay more robustly.

The lack of progress has frustrated many Americans, which some analysts say has contributed to the tone of this year's presidential campaign. Something has changed.

"I think the old relationship between shrinking unemployment and rising wages is permanently broken," notes Robert Reich, former Labor secretary and now chancellor's professor of public policy at the University of California at Berkeley, in an email.

He adds that "it's easier than ever for companies to outsource jobs abroad, and we're witnessing a vast wave of labor-supplanting technologies. As a result, I don't expect the pay of hourly workers to rise robustly."

This development reflects a now-familiar dynamic: robust raises at the top are counterbalanced by little or no progress at the bottom of the pay scale.

"The last recession really sped up the trend that had been happening through good times and bad over the past 30 years," says Ben Frost, global product manager for pay data at Korn Ferry Hay Group in London.

Employers are raising pay for highly skilled (and already highly paid) workers. …

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