U.S. employers are churning out jobs unabated as the economic expansion enters its ninth year, but the inability to generate more robust wage growth represents a missing piece in a largely complete labor recovery.
U.S. employers added a seasonally adjusted 222,000 jobs in June, the Labor Department said Friday, and the unemployment rate rose slightly to 4.4% with more people actively looking for work.
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The U.S. has added jobs every month since October 2010, a record 81-month stretch that has absorbed roughly 16 million workers and slowly repaired much of the damage from the 2007-09 recession. The unemployment rate touched a 16-year low in May and the number of job openings hit a record earlier this year.
Still, average hourly earnings for private-sector workers rose slightly in June, 2.5% compared with a year earlier, a level little changed since March. As recently as December, the figure was 2.9% and in the months before the recession, wage gains consistently topped 3%.
Since mid-2009, when the expansion started, hourly earnings of blue-collar workers -- for which long-run data series are available -- have grown on average 2.2% a year, much less than the 3% expansion of the 2000s, the 3.2% expansion of the 1990s or the 3.3% expansion of the 1980s.
Tepid wage growth is a puzzle because worker incomes should in theory rise faster as employers compete for scarce labor, though some economists say broader economic forces are at work.
"With both productivity growth and inflation continuing to prove sluggish, it is not altogether surprising that wage growth has disappointed," said John E. Silvia, chief economist at Wells Fargo.
Economists have advanced many explanations for the trend. A more globalized economy is holding down what workers can earn everywhere, especially in rich countries losing manufacturing jobs to low-wage economies. The reduced power of unions has impeded the bargaining power of workers. People are more easily replaced by machines or individuals sitting on the sidelines of the labor force waiting to return.
The burdens of slow wage growth, importantly, are softened for workers by the fact that inflation is low. Inflation-adjusted wage growth for blue-collar workers, at 0.7% a year in this expansion, is actually better than in any of the three previous expansions, and wages by this measure have grown for 49 straight months.
In the U.S. and elsewhere, central bankers have said wages could heat up soon. That is in part because more employers say they are struggling to find workers, which could lead to more bargaining power for workers.
Bryan Health, a Lincoln, Neb., nonprofit hospital network, has about 200 job openings this month, including entry-level cafeteria workers, janitors, clinicians, nurses and other medical specialists. Trouble filling the openings is a potential check on its growth, according to Jan Garvin, Bryan's vice president for human resources.
"We're a little stymied by the lack of available talent," said Ms. Garvin.
The hospital system is looking at new ways to staff areas with acute shortages, such as respiratory therapy. It plans to pilot a program this fall that pays full tuition plus a stipend or supplemental wages to employees who want to complete a two-year degree in the field.
Bryan boosted the pay of most workers 3% this year -- some areas with high demand received a 4.5% raise -- and is weighing a higher wage floor, now set at $11 an hour.
Improving opportunities in the job market appear to be slowly pulling Americans off the economy's sidelines. The labor-force participation rate, hovering near a four-decade low, inched up to 62.8% in June from 62.7% the prior month. The rate measures the share of the population age 16 and older either working or looking for a job.
Low participation is partly because of shifts at both ends of the workforce age spectrum -- fewer young Americans are looking for work and baby boomers are retiring. Among prime-age workers, those 25-54 years old, participation bottomed out in September 2015 and has been gradually trending higher. Job-market participation remains below its level just before the recession, suggesting there could be room for further growth.
That represents a potential untapped source of labor for employers like Bryan Health. It also suggests a continued weight on wages in the form of hidden labor supply.
There are other explanations for soft wage gains. Economists point to low worker-productivity growth, which limits the ability of firms to raise pay without eating into profits. Companies may also be hunting out cheaper workers -- either younger or less skilled ones -- rather than competing solely on wages.
"One alternative is to substitute away from perfectly qualified candidates and start looking at people who are a little less experienced, people who can be trained up," said Cathy Barrera, chief economic adviser for job-search site ZipRecruiter.
Signs of steady hiring are helping to give some workers confidence to take risks.
Christal Brown decided to leave Mattress Firm, the Houston-based retailer where she worked for 18 years, rather than take a new role she felt didn't fit her skills. Her last day was June 1. Ms. Brown, 44 and most recently the vice president of human resources, said she is confident she will find a new job in the coming months without having to relocate from her home in Houston. She already has landed a few interviews and hopes to find another role.
"I thought this was a good time to see what was out there to help me grow professionally," she said. "There are definitely jobs out there."
Opportunism like that has been in short supply through much of this slow expansion.
Largely in response to broad improvements across the labor market, the Federal Reserve raised short-term interest rates last month for the third time since December. Officials penciled in one more increase for this year, and appeared to reach consensus on how to gradually reduce the Fed's $4.5 trillion asset portfolio, moves that could lead long-term rates to rise.
"Today's report will keep the Federal Reserve on the path of gradually raising interest rates," said Gus Faucher, chief economist at PNC Financial Services.
Write to Jeffrey Sparshott at email@example.com
(END) Dow Jones Newswires
July 07, 2017 19:12 ET (23:12 GMT)