As the nation’s post-recession recovery turned into a long-running economic expansion, policymakers had hoped wages would start to boom once laid-off workers found jobs. With workers in shorter supply, policymakers argued, companies would start offering raises to attract new employees and keep their current ones.
But as the unemployment rate has dipped to a 17-year-low of 4.1 percent and firms nationwide struggle to fill vacancies, workers aren’t seeing the pay increases that were supposed to come with what analysts call the strongest labor market in two decades.
“People are finding jobs more quickly and easily,” said Jason Furman, an economics professor at Harvard University and former Obama administration official. “They’re more confidently quitting their jobs to find another. Everything with the way people are behaving is consistent with the strength in the labor market. But wages just aren’t picking up the way we thought they would.”
Workers’ average hourly earnings grew by 5 cents in November to $26.55 — part of an overall increase of 2.5 percent since the same period last year, the Bureau of Labor Statistics reported Friday. That’s a growth rate that lags significantly behind pre-recession levels, when year-over-year wage increases exceeded 4 percent.
Economists have struggled to find a single cause for the stubbornly slow pace. Some point to demographics: Baby boomers are retiring in droves, and the younger workers replacing them command smaller paychecks. Some suspect that automation may be eliminating formerly high-paying jobs. Others suspect it’s the result of a change in what types of employment are available, with growth in low-paying jobs outpacing more lucrative ones.
The lack of progress has frustrated policymakers, particularly because the economy is pulling people back into the labor market who had entirely given up on finding work in the wake of a devastating recession.
But so far, the pay bumps have been uneven. In construction, for example, average hourly pay has shot up 2.9 percent to $29.17 since last November, driven in part by rebuilding efforts in hurricane-walloped states, such as Texas and Florida.
Information workers — or those who make a living on the Internet, in publishing and in telecommunications — saw a 3.4 percent year-over-year raise to $38.59, the same as employees in the high-paying world of finance.
Leisure and hospitality workers have gotten a disproportionately large boost, 3.6 percent, but they still make an average of $15 an hour — less than the other major job categories.
Wages in manufacturing, however, appear especially stagnant, growing 1.9 percent since last November. That’s despite recent job growth in the sector, which Secretary of Labor Alexander Acosta pointed out Friday has an unemployment rate of 2.6 percent.
“The lowest ever recorded,” he said in a statement.
President Trump and Republicans on Capitol Hill have said they hope to pass sweeping changes to the tax code by the end of December, a move they believe will create more good-paying jobs and supercharge economic growth. Lowering the corporate tax rate, the GOP leaders assert, will inspire firms to invest and hire more. And in a controversial report, a top White House economist claimed the tax plan would cause workers to see thousands of dollars more per year.
“People are going to be very excited when they see their paycheck bigger,” White House economic council director Gary Cohn said about the president’s tax plan during a Friday interview with Fox Business.
The White House’s predictions for the economic affects greatly outstrip those of most mainstream economists.
Many analysts say it’s difficult to predict how companies would react to a tax cut, saying many may make moves that have little to do with economic stimulus or increased salaries. This week, Home Depot announced it would use some of its surplus billions to buy back shares of its own stock, a decision that will enrich top executives, and analysts predict other companies will make similar moves if offered a tax windfall.
“Historically, when you see tax cuts, there’s been no strong correlation there,” said Scott Anderson, chief economist at Bank of the West. “In my view, if I’m a CEO and I’m seeing tax cuts for my organization, I might give those tax cuts back to shareholders.”
The economy added 228,000 jobs in November, government economists reported Friday, maintaining a streak of growth that took off during President Barack Obama’s first term and kept pace through Trump’s first year in office. Monthly job gains have averaged out at 174,000 in 2017 and 187,000 in 2016, according to the Bureau of Labor Statistics.
Dan North, chief economist at Euler Hermes North America, a global credit insurance company, said the rising demand for workers at firms across the country lately isn’t enough to significantly increase paychecks.
“Workers should get a share in that increase,” North said, but “we also have labor coming back in off the sidelines.”
Productivity growth remains low, he said, inching up at an average annual rate of 1.2 percent over the last eight years, compared with its historic rate of 2.1 percent from 1974 to 2017, government numbers show.
Plus, the jobs growing most quickly in the United States offer some of the nation’s lowest wages. The home health aide industry, paying workers about $22,000 per year, will produce an estimated 425,600 positions by 2026.
Manufacturing continued to grow last month, adding 31,000 jobs including 8,000 in machinery, 7,000 in metal products, 4,000 in computer goods and 4,000 in plastic and rubber wares. That’s on top of 24,000 new manufacturing positions created in October after no growth in September.
Healthcare also showed strong expansion, the government data show. Ambulatory health-care services, which includes doctors’ offices and outpatient recovery centers, saw an increase of 25,000 jobs. Construction jobs surged by 23,000.
“November’s jobs report shows steady growth fueled by optimism about the pro-growth, pro-jobs policies being advanced by President Trump’s Administration,” Acosta said Friday in his statement. “Since January, the economy has added 1.7 million jobs.”