U.S. unemployment is low, but it sure took a long time to get there.
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The economy added 138,000 jobs in May, the Labor Department reported Friday, and payrolls for March and April were also revised lower. That counted as mild disappointment. Still, the unemployment rate kept grinding lower, dropping to 4.3% from 4.4%, reaching its lowest level since May 2001.
That counts as tight, and would normally be associated with rapidly rising wages as companies struggled to find workers. So far, it hasn't. Average hourly earnings were up 2.5% from a year earlier, the lower end of the range it has been in for about a year.
The weakness in wages has been a mystery. The standard explanation had been that a large number of people had stopped looking for work, so the supply of workers was greater than the unemployment rate indicated. This unseen supply was keeping wages lower. But those sidelined workers have been on the sidelines for so long that it is no longer clear they exist. The labor-force participation rate -- the share of the working-age population working or looking for work -- actually fell last month.
Robert Barbera, co-director for the Center for Financial Economics at Johns Hopkins University, suggests it is important to not just look at the unemployment rate's level, but how long it took to get there
It took a long seven years for the unemployment rate to get to 4.3% from the peak of 10% in October 2009. Because of the sluggish growth, businesses never had to scramble, and pay more, to add workers. And at no point did workers feel they were awash in opportunity.
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This slow growth doesn't give people confidence to ask for higher wages. And plenty of workers have never experienced that kind of environment: The 2000s were a bit of a dud outside of housing. Only workers in their 40s and older remember the 1990s boom. Maybe the U.S. labor market is turning a bit like Japan's, where the unemployment has fallen to its lowest level in nearly a quarter-century, but after so many years of disappointment, workers are hesitant to demand higher wages, and employers are hesitant to give them.
Write to Justin Lahart at email@example.com
(END) Dow Jones Newswires
June 02, 2017 12:34 ET (16:34 GMT)