In this Aug. 25, 2010 photograph, job seekers including Lindsey Wright, of Detroit, center, attend a job fair in Southfield, Mich. On Friday, Sept. 3, 2010, the Labor Department issued the August unemployment report. (AP Photo/Paul Sancy), a photo by Pan-African News Wire File Photos on Flickr.
BUSINESS DAY
Payroll Data Shows a Lag in Wages, Not Just Hiring
By NELSON D. SCHWARTZ
FEB. 7, 2014
For the more than 10 million Americans who are out of work, finding a job is hard. For the 145 million or so who are employed, getting a raise is even harder.
The government said on Friday that employers added 113,000 jobs in January, the second straight month of anemic growth, despite some signs of strength in the broader economy. The unemployment rate inched down in January to 6.6 percent, the lowest level since October 2008, from 6.7 percent in December.
But the report also made plain what many Americans feel in their bones: Wages are stuck, and barely rose at all in 2013. They were up 1.9 percent last year, or a mere 0.4 percent after accounting for inflation. Not only was that increase even smaller than the one recorded in 2012, it was half the normal rate of wage gains in the two decades before the last recession.
The stagnation helps explain why many people feel apprehensive even though the economy grew at a robust pace in the second half of 2013, corporate profits rose, the stock market boomed and the housing market continued to gain ground. The issue cuts across the American work force. In fact, white-collar workers did a bit worse than blue-collar workers last year in terms of wage growth.
“People are running in place in terms of their living standards,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “There’s almost no growth in spending power.” As recently as 2008, when the economy sank deeper into recession and Lehman Brothers collapsed, wages still managed to rise by 3.5 percent, before inflation. But the combination of a backlog of workers left behind in the recession’s wake, as well as productivity gains resulting from new technologies, means salaries may not rebound anytime soon.
“We won’t see stronger wage growth until unemployment gets below 6 percent and we begin adding 200,000 jobs a month,” Mr. Harris predicted. Friday’s data from the Labor Department shows an economy performing well below that level, however. The 113,000 jobs that were added in January fell far short of the 180,000 economists had anticipated, and came after a particularly weak December. Despite the decline in the jobless rate, some economists said on Friday that job creation had indeed slowed, in what might be called a winter wobble for the economy — the cold weather equivalent of last year’s summer swoon.
Dean Maki, chief United States economist at Barclays, noted that over the course of November, December and January, the more reliable three-month pace of job creation stood at 154,000, roughly 75,000 positions fewer than employers added in September, October and November. Initially, the weak report for December was blamed on wintry conditions that inhibited hiring, but Mr. Maki said a second straight month of disappointing job gains led him to conclude that the cold and snow could not be blamed this time.
“I don’t think we can say weather affected January payrolls,” Mr. Maki said, noting that the construction sector, for example, bounced back in January after a weak showing in December. Nevertheless, Mr. Maki and most other economists said they did not believe the weak numbers for job creation in December and January would prompt the Federal Reserve to reverse course on its decision late last year to steadily reduce its stimulus efforts in 2014.
“This will get the Fed’s attention, but it won’t affect their trajectory,” Mr. Maki said. Still, another poor showing for hiring when the next employment report comes out in early March might prompt a pause among Fed policy makers at their meeting later that month, especially if other indicators show a parallel cooling.
Wall Street shrugged off the unemployment report on Friday, as bullish investors sent stocks higher, with market indexes finishing higher for the week after three straight weeks of losses. The Dow Jones industrial average jumped 165.55 points, or 1.1 percent, to close at 15,794.08. The Standard & Poor’s 500-stock index gained 23.59 points, or 1.3 percent, finishing at 1,797.02. The Nasdaq surged by 68.74 points, or 1.7 percent, to 4,125.86.
In bond trading, the price of the benchmark 10-year Treasury note rose 5/32 to 100 18/32, while its yield dropped to 2.69 percent from 2.7 percent late Thursday.
One reason Wall Street may have looked on the bright side Friday is that the separate survey of households the Labor Department uses to calculate the unemployment rate told a different story from the payroll data survey. It showed a gain of more than 600,000 workers, helping bring down the unemployment rate.
In the payroll data survey for January, the public sector held back overall payrolls, as government employment shrank by 29,000 jobs in January. Excluding that loss, private employers added 142,000 positions, a slightly better showing. Several other sectors which had been strong in recent months — education and health care, as well as retail — also lost positions, contributing to the overall weakness.
The falloff in hiring in the health care sector was especially noteworthy. In December and January together, just 2,600 health care positions were filled. By contrast, as recently as November, nearly 25,000 health care workers were added to payrolls.
Although this area of the economy is undergoing a transformation as President Obama’s new health care plan is slowly introduced, that is unlikely to have caused the abrupt slowdown in hiring, said Mr. Harris, the Bank of America Merrill Lynch economist. If anything, he said, the law should create new jobs in the sector as health care coverage is expanded, even if higher costs for some employers result in job cuts elsewhere in the economy.
As for retail, which lost nearly 13,000 jobs in January, Mr. Harris said that some of the reduction could have been because of excess hiring in December, when stores added nearly 63,000 positions as the holiday shopping season peaked. The cuts may also have been spurred by weak results at some retailers, with chains like J. C. Penney announcing major job cuts last month, and Loehmann’s, the venerable discounter, now in liquidation.
The employment-population ratio, which has been falling as more workers drop out of the job market, edged up 0.2 percentage points, to 58.8 percent in January.
While salary gains have been muted across the work force, more educated workers continue to enjoy much better employment options than those with a high school degree or less. The unemployment rate for college graduates in January stood at just over 3 percent, compared to 6.5 percent for high school graduates and 9.6 percent for people who lack a high school diploma.
The problem for economic growth in general, and wage growth in particular, is that only one-third of the American work force — 50.4 million out of 155 million — have a college degree or more. By contrast, there are approximately 73 million workers who have a high school diploma or some college, and 11 million workers who did not finish high school.
With many less educated workers chasing a limited number of new jobs, employers have little reason to increase wages. “It’s just an extremely competitive environment for workers, where people have little negotiating power,” Mr. Harris said.
No comments:
Post a Comment