After a Bounce, Wage Growth Slumps to 0.1%
By DIONNE SEARCEY
MARCH 6, 2015 .
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The economy is adding jobs at a rapid pace, the Labor Department reported on Friday, but there’s still one major holdout to the recovery: wages.
Employers increased their payrolls by 295,000 workers in February, exceeding expectations, and the unemployment rate fell to 5.5 percent, its lowest point since the spring of 2008. But wage gains continued to lag, rising only 0.1 percent in February for private-sector workers after a reported 0.5 increase in January.
That resulted in a mere 2 percent advance over a year earlier, washing away the encouraging jump in January.
Despite the disappointing wage numbers, the report prompted a new round of optimism about the economy’s comeback from the recession along with fresh talk on Wall Street that the Federal Reserve might raise interest rates at its June meeting rather than wait until September.
The news led to a sharp rise on Friday in the yield on 10-year bonds and a substantial drop in the stock market, where investors feared that higher interest rates would make equities less attractive and chip away at corporate profits.
“We were all on guard for signs of a February freeze-up, but this is a barnburner of a jobs report,” said Mark Hamrick, an analyst at the personal finance site Bankrate.com. “The Fed will say the pieces are coming together.”
Job growth last month was heavily concentrated in the service sector, with leisure and hospitality adding 66,000 jobs, as well as an expansion of 54,000 jobs in education and health.
Construction added 29,000 jobs in February, while manufacturing increased by a modest 8,000. Gains were also made in professional services and the trade and transport sectors.
Construction added 29,000 jobs in February, while manufacturing increased by a modest 8,000. Gains were also made in professional services and the trade and transport sectors.
Still, one consistently dark patch in the recovery has been the sluggish growth of wages. It suggests that the economy is still far from returning to its potential and is a big factor behind the sense among many Americans that the recovery has largely left them behind.
“Everyone knows of someone who has been laid off or has a friend or relative who has been laid off,” said Gary N. Chaison, professor of industrial relations at Clark University in Worcester, Mass. “We hear we’re on the road to recovery, but people aren’t convinced of that.
Another reason for the disenchantment is that millions of potential workers remain detached from the job market. The labor participation rate, which counts both those with jobs and those looking for them, has stabilized, but at lows last seen in the late 1970s, falling slightly in February to 62.8 percent, from 62.9 percent.
“While there’s no doubt the labor market is improving, and doing so at a faster clip than in recent years, there are still missing ingredients suggesting that the U.S. job market is not as close to full employment — a truly tight matchup between jobs and job-seekers — as the low jobless rate suggests,” Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, wrote on his blog.
On the brighter side, the share of long-term unemployed, those who are out of work for 27 weeks or more, declined to 36.8 percent. That is still well above where it was when the recession began in late 2007, but it has fallen by almost six percentage points in the last year, said Omair Sharif, a strategist at Société Générale.
Another reason for the disenchantment is that millions of potential workers remain detached from the job market. The labor participation rate, which counts both those with jobs and those looking for them, has stabilized, but at lows last seen in the late 1970s, falling slightly in February to 62.8 percent, from 62.9 percent.
“While there’s no doubt the labor market is improving, and doing so at a faster clip than in recent years, there are still missing ingredients suggesting that the U.S. job market is not as close to full employment — a truly tight matchup between jobs and job-seekers — as the low jobless rate suggests,” Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, wrote on his blog.
On the brighter side, the share of long-term unemployed, those who are out of work for 27 weeks or more, declined to 36.8 percent. That is still well above where it was when the recession began in late 2007, but it has fallen by almost six percentage points in the last year, said Omair Sharif, a strategist at Société Générale.
And with the economy galloping ahead, many analysts say it is only a matter of time before wages start to increase at a faster pace as payrolls expand and companies need to compete more aggressively to attract employees.
“We’re facing a turning point, and we’re going to see more pressure on wages,” said Tara Sinclair, chief economist at the job search site Indeed.com.
The unemployment rate for adult women ages 20 and older was 4.9 percent in February, down from 5.1 percent in January, according to the National Women’s Law Center. February was the first time the adult women’s unemployment rate had been below 5 percent since July 2008.
For now the economy is creating some distinct winners and losers, with women gaining an edge.
The unemployment rate for adult women ages 20 and older was 4.9 percent in February, down from 5.1 percent in January, according to the National Women’s Law Center. February was the first time the adult women’s unemployment rate had been below 5 percent since July 2008.
Among women, some are doing better than others. The unemployment rate for adult white women was 4.2 percent in February, down from 4.4 percent in January.
But adult black women’s unemployment rate rose in February to 8.9 from 8.7 percent in January and 8.2 percent in December. Unemployment rates for adult Hispanic women declined slightly in February from January, to 6.1 percent from 6.2 percent, a new low for this group but still well above women’s overall unemployment rate.
Women accounted for 55 percent of the new jobs added in February, according to the law center. But 39 percent of the jobs that went to women were in retail and leisure and hospitality, which typically pay lower wages.
“February posted strong job gains and a decline in overall unemployment, but many women have yet to see a real recovery,” said Joan Entmacher, vice president for family economic security at the law center.
But even the retail sector is beginning to pay better. Last month, Walmart said it planned to raise its minimum hourly pay to $9 and lift it to $10 next year. TJX Companies, which owns Marshalls and T. J. Maxx, announced similar raises. State and local legislation in past months has helped put a higher floor under wages, raising the legal minimum in a wide variety of places.
Labor Secretary Thomas E. Perez called all those moves “a shot in the arm.”
“As we continue to have month after month of significant job growth, what we will see invariably is a tighter labor market,” Mr. Perez said in a telephone interview. “And tighter labor markets mean higher wages.”
More of the new jobs are full time. Last month, the number of workers who said they were working part time for economic reasons fell, leaving their share of all part-time workers at 25.1 percent, down from 25.6 percent in the previous month.
Labor advocates like the National Employment Law Project say retailers should also be doing more to add hours as well as lifting pay for some workers.
The group says too many people, many of them women, want full-time work but can’t find it. The number of adults who work part time but who want to work on full-time schedules is 50 percent above the number reported in 2007, according to Gary Burtless, a senior fellow in economic studies at the Brookings Institution.
Shannon Henderson, 29, works part time in customer service at a Walmart store in Sacramento, and supports two children with her $10-an-hour wages. Her hours are unpredictable, often interfering with her breast-feeding schedule for her 9-month-old.
She says that she wants to work more, but that the company did not have more full-time positions. If she tried to work a second job, she said, she might miss a shift at Walmart and jeopardize her job there. And more hours would allow her to buy a car, providing her with greater flexibility.
But for now, she said, “I don’t make enough money.”
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