Mixed Signals in the Labor Market
Job openings are growing, but wages need to play catch-up.
Five-plus years into the current economic recovery, the labor market is healing at last. So why do Americans still feel so blah when it comes to their financial well-being?
A look at the numbers suggests we should be peppier. The unemployment rate, now at 6.2%, is near a five-year low. For six straight months, more than 200,000 workers were added to payrolls, the longest such stretch since 1997. And job growth has been widespread across industries, from financial services to health care to construction. The quality of jobs is improving, too. Scott Anderson, chief economist with Bank of the West, says that although monthly numbers fluctuate, over the past 12 months more full-time than part-time jobs were created overall.
But the job market still has a long way to go before it hits full stride. “We’re making progress, and we’ve been doing it faster over the past six months than we have since the expansion began,” says Anderson. “But I’m not going to say, ‘Mission accomplished.’ ”
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Indeed, by some measures, we’re still struggling. Job openings are up, for instance, but that isn’t translating into an equal number of new hires. “There’s a mismatch,” says Anderson. Employers are having difficulty finding employees with the right skill sets.” The average time it takes to get a job has dropped to 32.4 weeks from a high of 43 during the worst of the recession. But the historic average is 17 weeks. And the number of long-term unemployed—people who have been out of work for more than 27 weeks—stood at 3.2 million at last count, an improvement from 6.8 million at its worst but more than double the number before the recession. “If people drop out of the labor force and don’t come back in, it will affect long-term economic growth rates,” says Anderson.
Of course, the bottom line for most Americans is their paycheck—and that hasn’t been going up. Wage growth, by most measures, has averaged about 2% annually since mid 2009, roughly the rate of inflation. “That means there’s no real wage growth,” says Mark Zandi, chief economist with Moody’s Analytics, which is why most people say the economy is still in bad shape.
“If their pay increase is equal to inflation, they’re dead in the water,” he says. “And that’s a blah economy.”
If wages were to rise meaningfully (say, by 3% to 4%), then people would make more discretionary purchases, driving up demand for goods and services. In response, businesses would have to hire more people to help them supply those goods and services, which would, in turn, drive wages up. “It’s the chicken-and-egg problem,” says Heidi Shierholz, an economist with the Economic Policy Institute. “Wage growth would help the economy, but we’re still in a weak labor market. Employers don’t have to offer higher wages to attract workers because workers are desperate for a job.”
Salaries are on their way up, albeit slowly. Kiplinger’s projects that wage growth will hit 4% by 2017, a level that is likely strong enough for people to feel good about the economy. For now, expect the focus to remain on jobs. Says Shierholz: “The labor market is where the rubber meets the road. What job opportunities do I have? How good are the jobs? That’s what the economy means to most people.”
Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.
-
Save Over $40 on Audible With Amazon's Latest Deal
Amazon’s latest promotion lets you score three months of Audible for just $0.99 a month.
By Erin Bendig Published
-
Buy eBay and Sell Etsy, Morgan Stanley Says
Morgan Stanley is bullish on eBay and bearish on Etsy. Here’s what you need to know.
By Joey Solitro Published
-
The Robots Are Coming... But Not For a While
The Kiplinger Letter There’s excitement in the tech sector over the potential of humanoid robots, but widespread adoption is likely to be years away.
By John Miley Published
-
Farmers Face Another Tough Year As Costs Continue to Climb: The Kiplinger Letter
The Kiplinger Letter Farm income is expected to decline for a second year, while costs continue to up-end farm profitability.
By Matthew Housiaux Published
-
H-1B Work Visa Rules Get a Revamp
The Kiplinger Letter H-1B visas allow employers to hire high-skilled foreign workers. Regulators have finalized new rules for this visa program following last fall's proposal.
By Matthew Housiaux Published
-
When's the Best Time to Buy a Domestic Flight? The Kiplinger Letter
The Kiplinger Letter A new study by CheapAir.com has crunched the numbers.
By Sean Lengell Published
-
Woes Continue for Banking Sector: The Kiplinger Letter
The Kiplinger Letter Regional bank stocks were hammered recently after news of New York Community Bank’s big fourth-quarter loss.
By Rodrigo Sermeño Published
-
Are College Athletes Employees of Their Schools?: The Kiplinger Letter
The Kiplinger Letter A recent ruling has ramifications for labor relations and the unionization of student athletes.
By Sean Lengell Published
-
Salton Sea Clean Energy and Lithium Project Gets Approval: The Kiplinger Letter
The Kiplinger Letter California's Salton Sea is due to see the construction of a new lithium extraction and geothermal clean energy power plant.
By Matthew Housiaux Published
-
More Woes for Anheuser-Busch as a Strike Looms: The Kiplinger Letter
The Kiplinger Letter Drinkers of Anheuser-Busch beers may want to stock up soon. A looming strike threatens to shutter its U.S. breweries later this month.
By Sean Lengell Published