Strong Job Growth, Weak Wage Gains in June

Posted on by & filed under Nevada by the Numbers Blog.

Below is the latest Jobs Byte from Dean Baker at the Center for Economic and Policy Research, with emphasis added by us in bold. The upshot is not unfamiliar for those following recent employment reports, whether national or local. While job growth is good and the headline unemployment is hovering around a “full” level, wage gains are not following as expected and, adjusted for inflation, are still below pre-recession highs. Wells Fargo offers some insight as to why:

“Instead, businesses are sweetening the deal for workers around the edges. Benefits, especially one-time bonuses, are outstripping wages. Rather than competing for already-qualified workers, employers are also “down-skilling.” By easing job requirements, employers have held the line on wages, but are increasingly shelling out for training”

The Bureau of Labor Statistics reported the economy added 213,000 jobs in June. With upward revisions to the data from the prior two months, the average gain over the last three months was 211,000. The unemployment rate edged up to 4.0 percent, but this was due to a reported surge of 601,000 people entering the labor force. The overall employment-to-population ratio (EPOP) was unchanged at 60.4 percent, tied for a high for the recovery. The EPOP for prime-age workers (ages 25 to 54) edged up to 79.3 percent, tying the high for the recovery reached in February.

In spite of the strong job gains and widely voiced complaints from employers about difficulties in finding workers, wage growth does not appear to be accelerating. The average hourly wage has increased by just 2.7 percent in the last year. The increase is the same for both overall employment and production and nonsupervisory workers.

In fact, if we compare the average wage for the last three months (April, May, and June) with the prior three months (January, February, and March), it appears to be slowing slightly, with an annualized growth rate of just under 2.6 percent. This suggests difficulties of finding qualified workers are hugely overstated.

The job gains in the establishment survey were broadly based. Manufacturing led the way with an increase of 36,000 jobs, 12,000 of which were in autos. In spite of healthy job growth, wage growth is especially weak in manufacturing, rising just 1.7 percent over the last year.

Health care added 25,200 jobs, almost exactly in line with its average over the last year. Professional and technical services added 25,100 jobs in June, more than its average of 18,900 over the last year. Jobs in educational services jumped 18,900, compared with an average of just over 5,500 in the last year. This may be due to erratic seasonal factors. Restaurants added 16,400 jobs in June, under the average of 18,400 over the year. The government sector added 11,000 jobs, mostly due to an increase of 13,000 jobs in local government.

The news in the household survey was mostly positive. The rise in prime-age EPOPs in June was all due to a 0.4 percentage point rise in the EPOP for women, as the EPOP for men fell 0.2 percentage points in the month. Nonetheless the EPOP for men is still 0.9 percentage points above its year-ago level, compared with 0.7 percentage points for women.

The EPOP for Hispanics rose 0.4 percentage points to 63.4 percent, a new high for the recovery, while their unemployment rate fell to 4.6 percent, the lowest on record. The number of people involuntarily working part-time fell by 205,000, hitting a new low for the recovery. It is now back to prerecession lows measured as a share of employment.

On the negative side, the unemployment rate for black workers increased 0.6 percentage points to 6.5 percent from the record low hit in May. This was most due to a 1 percentage point rise in the unemployment rate for black women, although their EPOP also rose by 0.6 percentage points.

The percentage of unemployment attributable to voluntary quits fell to 12.4 percent, more than reversing a big jump reported in May. While 12.4 percent is still high for this recovery, it is well below the rates of more than 14.0 percent seen the last time the unemployment rate was this low in 1999 and 2000.

The big gainers in terms of employment continue to be less-educated workers. The unemployment rate rose by 0.3 percentage points in June for college grads. It is now unchanged for the last year, half a percentage point above its prerecession level. By contrast, in the last year the unemployment rate has fallen by 0.4 percentage points for workers with just a high school degree, by 0.5 percentage points for workers with some college or an associate degree, and a full percentage point for workers with less than a high school degree.

The report also shows that the share of workers who have multiple jobs remained stable over the last year at 4.8 percent. The Contingent Workers Survey released two months ago showed that the claim that gig economy jobs were replacing traditional employment was a myth. In fact, it seems that gig economy jobs are largely replacing other forms of secondary employment as multiple job holding is down from recession peaks and back to prerecession levels.

Multiple Jobholders as a Percent of Total Employed

The overall picture is again one of a strengthening labor market, but one that is still not tight enough to produce substantial wage growth.