Trump gets good news on wages
A new report from the Labor Department on Friday showed a significant hike in wages, providing a bolt of good news to President Trump and congressional Republicans less than two months before the midterms.
There have been few signs of wage growth even as unemployment has fallen and the economy has expanded. But Friday’s report suggested wages may finally be on the rise, though they are, as of now, only keeping up with inflation.
Worker pay grew 2.9 percent in the past year — near the target of 3 percent — the fastest growth since the recession ended in June 2009, and a positive sign that paychecks may get a boost after years of stagnation.
{mosads} A rise is wages has been a major missing element of a more than nine-year economic recovery, confounding economists.
“It’s been surprising that the length of the jobs recovery and the low level of the unemployment rate have not boosted wage gains more strongly, but the August figures may be a sign of accelerating wage gains,” said David Berson, chief economist at Nationwide.
Economists have been forecasting that businesses would raise wages to get the employees they wanted in a tightening labor market.
Robert Frick, a corporate economist with Navy Federal Credit Union, said that “wages have been lagging for months given the late stage of the expansion, and they’re still nullified by the increase in inflation.”
“At this point in previous expansions we’ve seen wages rising at a 3.5 percent or even above a 4 percent rate,” Frick said.
But he said with strong jobs growth and rising wages “we could be entering that sweet spot for workers that’s typical at an expansion’s peak.”
He added that the good news is that the bulk of the wage gains are coming for workers who earn lower wages, which is a good sign, since pay raises have been slow in those areas during the expansion.
The rise in wages also is a sign that employers want to keep their workers in a tightening labor market where it’s already hard to find skilled labor across pay grades.
In the April-June quarter, the economy expanded at a 4.2 percent annualized rate, the best pace in four years, yet wages have remained flat.
But even the latest increase only just offsets rising inflation, each having risen 2.9 percent in the past year.
Congressional Democrats have routinely hammered Republicans on the lack of wage growth.
House Minority Leader Nancy Pelosi (D-Calif.) argued recently that while corporate profits were hitting all-time highs, wages weren’t increasing for workers.
Friday’s jobs report showed the economy added 201,000 jobs, but Pelosi said that workers’ wages are only increasing at about the same pace as inflation.
“August’s jobs report shows that the soaring cost of living for families continues to lead to stagnant real wage growth for workers,” Pelosi said in a statement.
“While the wealthy and well-connected fill their pockets, hard-working men and women are struggling to keep up with everyday needs that are getting more and more expensive.
However, from the Republican side, Sen. John Thune (R-S.D.) said Friday that the GOP agenda is growing the economy and helping American workers.
“Republicans came to Congress to make reforms that would grow the economy and get more Americans on the pathway to success,” he said in a statement on the jobs report.
“Our pro-growth, pro-jobs agenda is delivering those results.”
President Trump has taken full credit for the strong economy, touting the jobs numbers and wage growth during remarks in Fargo, N.D.
This week, Kevin Hassett, head of the White House’s Council of Economic Advisers (CEA), released a report arguing that the government’s numbers don’t include healthcare and other benefits that would more accurately calculate wage growth.
“We find that wage gains are 10 to over 20 times more than the headline measures,” Hassett said.
Based on Hassett’s calculations, wage growth adjusted for inflation is 1.4 percent, much higher than the 0.1 percent reported by the Labor Department in August.
“Many of the official wage statistics fail to incorporate additional employment benefits such as bonus pay, health insurance and contributions to retirement savings,” the CEA argued in the paper.
But Jason Furman, former head of the CEA under President Obama, argued on Twitter that most of CEA’s points “are not new but many of them are under-appreciated so good to call attn to them.”
“But they don’t change our understanding of wage growth in the economy,” he said.
And not everyone viewed the latest jobs report as rosy.
“I think this is a sign of our diminished expectations,” said David Kelly with JP Morgan Funds on CNBC.
“We’ve got the tightest labor market in 50 years and in real terms average hourly earnings are up pretty much exactly the same number as CPI inflation for the last month, we have no real gain in wages despite the tightest labor market in 50 years and a 10-year expansion. I think this is the sign of the weakness of labor in terms of getting wage gains rather than any real strength.”
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