U.S. Job Market’s Strength Is Allowing More to Share in Pay Gains
Posted January 5, 2018 8:25 p.m. EST
The bustling United States economy is beginning to benefit some American workers who have not gotten a taste of the recovery and have been most in need of relief.
That picture was reinforced by a report Friday from the Labor Department, which showed an increase of 148,000 jobs last month. The figure fell short of economists’ expectations, but some of the most impressive job gains in the past year were in blue-collar and service industries that pay a decent salary.
Overall, average hourly earnings were 2.5 percent higher in December compared with the year before, scarcely keeping up with inflation. But other data shows that wages have increased most for the least-educated workers and for people in many industries that are generally low-paying.
“Growth is strong, and the benefits of this growth have been widely shared,” said Jed Kolko, the chief economist for Indeed.com, a job-search site. “This has been a year in which some of the gaps in the economy that had been growing narrowed a bit.”
Manual-labor positions are the kinds of jobs that President Donald Trump has promised to bring back in droves, so progress could be politically important. Hiring picked up fastest in construction and mining. Manufacturing, which lost jobs in 2016, expanded last year at a respectable clip, part of a global resurgence.
Reflecting the economy’s resilience, overall hiring in 2017 was only slightly lower than in 2016 — and it has risen for 87 consecutive months, a remarkable feat.
The unemployment rate was steady at 4.1 percent, a 17-year low. The numbers point to an economy that still has some room to grow.
In a Twitter post Wednesday, Trump cited the unemployment rate as evidence that the economy is “only getting better!” When he took office last January, the rate was 4.8 percent.
“Stock Market had another good day but, now that the Tax Cut Bill has passed, we have tremendous upward potential. Dow just short of 25,000, a number that few thought would be possible this soon into my administration. Also, unemployment went down to 4.1%. Only getting better!,” Trump wrote.
Most economists say presidents do not generally determine the economy’s course, and it is too early to measure the hiring effects of the tax cut signed into law last month. But Trump’s agenda may be having an impact on the economy in other ways. His push to dismantle regulations on businesses seems to have emboldened corporations to start putting more money into machines and plants, the kind of spending that drives broad growth.
A separate survey of manufacturers released Wednesday suggested that U.S. factories have picked up their orders, production and hiring over the past year.
Democrats offered a less sanguine view of the labor market, asserting that most Americans were still enduring paltry raises and that the Republican tax plan was a boon only to the upper stratum of the country. Among the solutions advocated by Democrats is to increase the minimum wage, as 18 states did on Jan. 1.
“The American economy is unbalanced,” Rep. Joe Crowley of New York, the leader of the House Democratic Caucus, said in a statement. “Workers struggle to find financial security while special interests, corporations, and the richest among us enjoy lavish tax breaks.”
Wages have been one of the most intensely debated puzzles of the labor market, with incomes growing at a more sluggish rate than the hiring demand would suggest.
There are signs beneath the surface, though, that more widespread wage growth may be around the corner.
The security industry, for example, where pay is below average, showed a 7 percent increase in hourly earnings in November from a year earlier. Workers in clothing stores and food services — two huge, generally low-paying businesses — saw wages rise by around 4 percent in that period.
In areas where unemployment has dipped below the national rate, pay has begun to accelerate. Cities where joblessness is 3.5 percent or lower have had an impressive 4 percent year-over-year increase in earnings, said Ian Shepherdson, chief economist of Pantheon Macroeconomics.
In Indianapolis, where unemployment reached 3.1 percent in November, wages for jobs in the private sector rose by nearly 5 percent in the second quarter compared to a year earlier.
“If the unemployment rate everywhere gets to 3.5 percent, then wage growth everywhere will get to 4 percent,” Shepherdson said.
That kind of tightening may nudge some employers who have resisted giving raises.
“The wage growth rate kicking in isn’t an automatic thing that happens in the economy,” said Cathy Barrera, chief economist at ZipRecruiter, a job-listing platform. “It requires employers to feel that friction, that competition for talent, to change what they offer recruits.”
E-commerce companies have begun to raise wages in hot warehouse markets, such as Memphis or the Inland Empire in Southern California, said Bill Ravenscroft, a senior vice president at Adecco Staffing USA. The agency employs around 60,000 workers, hiring more during the holiday season, and places many in distribution centers and warehouses often used by e-commerce giants.
But employers are not taking that approach across the board. Many are vying for pickers, packers and shippers by offering new perks. Logistics companies have begun providing on-site child care, or reimbursing employees who need to put their children in day care while they work.
Some companies are entering workers in raffles every week to win laptops, televisions and tablets, or are bringing food trucks to their warehouses and paying for employees’ lunches.
“These types of benefits in the past, you associated them with Silicon Valley startup companies,” Ravenscroft said. “They weren’t synonymous with your traditional employers.” Clients are hesitant to offer permanent wage increases, he said, but that could change if the jobless rate continues to dip. Bob Peterson, the chief executive of Melton Truck Lines, said he had been feeling the job market’s heat all year, and that he now had no choice but to raise pay for his 1,600 drivers.
“With unemployment this low, anyone worth their salt has got a job and probably a darn good one,” Peterson said. Melton operates in 48 states and has offices in five.
The tight job market has been especially tough on Peterson, because he requires a drug test for everyone who comes through the door. Many fail, especially after several states legalized marijuana for medical or recreational use.
“There’s guys and gals that like to smoke weed, but they can’t drive a commercial vehicle because it’s prohibited,” Peterson said. “Some people get here and we find out, oops, they have been smoking or injecting.”
Peterson has not given raises in two years, he said, because when he had asked his clients to increase their rates, they threatened to hire another trucking company. He is planning to increase salaries by 10 percent in 2018. Part of the reason, he said, was that he was seeing hiring pick up in the construction business and in manufacturing, two sectors that he competed with for able bodies.
“No one is having an easy time hiring blue-collar workers today,” Peterson said.
Those pressures are bearing down on manufacturing, which added a solid 196,000 jobs last year, and construction, where payrolls increased by 210,000. Mining employers also posted solid gains, bucking a trend of job losses in recent years.
The crash in oil prices in 2014 was particularly hard on jobs in the mining sector, which includes support services in oil fields, and had ripple effects on construction and manufacturing, partly because U.S. companies make much of the world’s mining equipment. Oil prices have begun to climb, and that may be one piece of the expansion in all three sectors, economists said.
The rest of the world is also in the midst of a strong recovery, helping to drive an American uptick in productive blue-collar work.
“The manufacturing upturn story is a global story,” Shepherdson said. “It’s happening everywhere. You can’t take credit for the recovery in Europe and China.”