While Jobs Increase And Unemployment Drops, Wages Have Yet To Catch Up
The economy continued its promising rise in jobs this February as almost 300,000 were added and unemployment dropped to roughly 5.5 percent. The number of jobs being added every month has consistently beaten many economists’ estimates.
Though this number doesn’t include the people who are considered long-term unemployed — that is, those who are out of work for 27 weeks or more — that number fell too. It is now 36.8 percent, down almost six percentage points in the last year. Most of the new jobs added in February were in healthcare, construction and business services, as well as food services and transportation.
With a few exceptions, however, wages have not yet risen with the strengthening economy. According to The New York Times, wages have risen only two percent in the past year, with a 0.1 percent rise in February.
However, the fact that wages aren’t rising by much just yet isn’t a reason to worry. Economists point out that wages rise when the labor market is tight, which means that the number of jobs and job seekers comes close to even. When this happens, employers must pay more to encourage people to come work for them instead of at a competitor; in other words, employers no longer have their pick from a wide selection of unemployed people who will work for anything. They must instead hire from people who will easily have choices of other jobs instead.
As Forbes economist Tim Worstall points out, a high-unemployment economy will prevent wages from rising, but a low-unemployment economy will see the opposite. He cites Walmart’s recent announcement that it would be raising its minimum wage to $10 an hour by February, 2016.
“Put the two together and we can see why Walmart raised wages. Nothing to do with union power or protestors. It’s just that the macroeconomy is improving. As it does so workers have a choice about jobs. So more of them are quitting low paid jobs in retail for something better, meaning that Walmart needs to spend ever more recruiting from the diminishing labor pool and then training those people.”
As more jobs become available and are subsequently filled, wages may soon start to rise with them. This isn’t to say that nationwide relief will come within the next few months; there’s still a long way to go.
It’s also worth noting that this job growth is not being seen equally by all Americans. Unemployment rates for black and Hispanic women are well above the overall employment rate for women, and unemployment for black women actually increased from 8.7 to 8.9 percent.
There is still some reason for optimism, and why there’s no need to panic just yet. Labor Secretary Thomas E. Perez said, “As we continue to have month after month of significant job growth, what we will see invariably is a tighter labor market. And tighter labor markets mean higher wages.”
As the economy grows and continues to add more jobs, news of its growth will hopefully soon be joined by news of rising wages — which, in spite of all the good news, are still sorely needed.
[Photo by Spencer Platt/Getty Images]