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An October treat for U.S. workers: real but modest wage rebound

The U.S. economy added 161,000 jobs in October while the unemployment rate ticked down one-tenth of a percent to 4.9. And in August and September, the economy added 44,000 more jobs than previously reported.

“It’s basically a very solid report that shows the continued trend in improvement in the labor market,” said Douglas Holtz-Eakin of the conservative American Action Forum, pointing to the breadth of job increases across industries and the rise in average hourly wages.


The star of the report was wage growth. Average hourly earnings increased 10 cents in October, following an 8-cent gain in September. Over the year, wages have grown 2.8 percent, at least a full percentage point faster than inflation.

Low wage growth has puzzled economists for months. In a high-unemployment economy, employers can hire workers on the cheap — after all, workers just want a job. But as the economy tightens and the unemployment rate falls, workers have more power because employers have to offer higher wages to attract and retain them. Despite the roughly 5 percent unemployment rate for the past year, economists had not seen much wage growth.

That appears to be changing.

Economist Elise Gould of the left-leaning Economic Policy Institute says the 2.8 percent wage growth suggests that “workers may be starting to gain some leverage now.” And while she’s optimistic for more growth, the 2.8 percent growth still isn’t satisfactory.

“Wage growth should be stronger than 3.5 percent. 2.8 is getting there, but the economy can certainly stand stronger wage growth, certainly after a time of very slow wage growth,” she said.

William E. Spriggs, chief economist of the AFL-CIO and a professor at Howard University, thinks the labor market has a way to go. “I don’t think it is a sign of being tight. I think we’re slowly getting there,” he said.

“People forget how deep the bottom was eight years ago because they’re impatient. But this is one of the strongest recoveries, and the fastest rebound in wage growth since the 1970s.”


There’s another factor with October’s unemployment rate we need to consider: the discrepancies in unemployment among major worker groups.

“There’s are still huge differences in black unemployment,” said Spriggs. The black unemployment rate is 8.6 percent, while white unemployment rate is 4.3 percent. And it’s not due to educational attainment, said Spriggs, pointing to a 6.1 percent unemployment rate for white high school dropouts.

“We still have to struggle with that reality,” because it’s what keeps the unemployment rate where it is, he added.


The Bureau of Labor Statistics’ measure of underemployment and unemployment, the U-6, dropped in October to to 9.5 percent, its lowest level in eight years.

The cause? “The number of people who are working part-time for economic reasons has declined,” said Holtz-Eakin. Thanks to widespread job creation across high-skill and low-skill industries, there are just more opportunities out there, he added.

Spriggs points to a decrease in discouraged workers. “We’ve had several months where unemployed workers are more likely to get a job than drop out. The number of discouraged workers is going down.”

Our even more comprehensive Solman Scale U-7, which, in addition to the officially unemployed, also includes part-time workers for economic reasons and anyone who wants a job, no matter the last time he or she looked, also decreased: to 11.8 percent from 11.9 percent in September.


All in all, this jobs report was solid and shows that the economy continues to bend in the right direction with a record 73 months of consecutive job growth.

So does this jobs report help either candidate heading into Election Day?

“Honestly, this report means nothing to either of them.” said Holtz-Eakin. “All of the evidence on impact of economies on elections points to the fact that people, somewhere between three and six months in advance, make up their mind on what they think about the economy and the candidates.”

Even if this month’s jobs reports won’t affect the election, it didn’t stop economists and pundits from election related tweets:

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