One of economists’ biggest concerns is that U.S. consumers could be pulling back. The Reuters/University of Michigan Consumer Sentiment Index fell last month. IHS Global Insight predicts that annual growth in back-to-school retail sales will slow this year compared with last year.
Rising gas prices would compound the problem by diverting buying power to the pump and away from other sectors. The price of West Texas crude rose to nearly $110 a barrel at the end of last week, its highest level in more than a year. Analysts attribute much of the increase to striking oil production workers in Libya, and they warn that an escalating war in Syria could bring higher prices still.
The reverse was true earlier this year. Prices were relatively low, less than $90 a barrel, which helped to offset the effects of payroll and income tax increases that stemmed from the year-end “fiscal cliff” deal.
Now, the higher cost of fuel is colliding with the grim reality that incomes are not rising very fast for many American workers.
With 11.5 million people looking for work and unable to find a job, there is little incentive for employers to bump up paychecks, especially for lower-skilled workers. Sure enough, Wells Fargo economists reported last week that since the recession ended, job growth has been stronger than normal in low-wage jobs, and those wages are falling.
Jobs in the lowest quintile of wages account for nearly 30 percent of the jobs created since the recession, the economists found. Making matters worse, employees in those jobs are not able to work as many hours as they did three years ago.
“It’s a bit worrisome,” said Sarah Watt, one of the Wells Fargo economists who compiled the report. “The [low] wages are tough enough for those workers to stomach. But then you also look at how they’re not able to work as much as they want.”
The report also highlights a growing disparity between wages in the top-paying jobs, which are increasing, and the falling wages at the bottom. “The average real wage in the highest-paying industry (a subsector of the financial services industry) stands 3.7 times higher than the average real wage in the lowest-paying industry (gasoline stations),” the report says. “At the same point during the last employment recovery, the dispersion in real wages between the highest-paying and the lowest-paying industry was 3.2 times.”
The Commerce Department’s latest income data suggest it’s not just gas station attendants or fast-food workers who are feeling the wage pinch. It’s also government workers. Government wages have fallen 5 percent since January, a drop the department attributes to pay cuts and furloughs driven by sequestration.