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November 7 2016

For Most Workers, "Wage Growth Is Still Anemic"

Rachel DiCarlo Currie

The good news from Friday’s jobs report: Our economy added a net total of 161,000 nonfarm payroll jobs last month, and average hourly earnings grew at an annualized rate of 2.8 percent, the biggest year-on-year increase since 2009.

The bad news: America’s labor force shrank by 195,000 workers, which is the only reason that unemployment fell from 5 percent to 4.9 percent. (The number of people employed actually declined by 43,000.) Also, wage growth for most workers was less impressive than the headlines would suggest.

On this latter point, Wall Street Journal reporter Paul Vigna provides some much-needed perspective:


[T]he number that got everybody excited was the 2.8% year-over-year gain for average hourly earnings. It’s certainly not a bad number, indeed it’s the best since June 2009. It’s just that the number comes with a couple of very big caveats.

Problem one: It’s hourly. Weekly earnings were up 2.5% from a year ago. Weekly earnings are more indicative of a person’s actual financial condition than hourly earnings, and 2.5% is pretty much where we’ve been all along. So that’s a letdown.

Problem two, and this is the bigger problem: The 2.8% gain is for all employees. For “private-sector production and nonsupervisory employees” the gain was only 2.5%. On a weekly basis, it the gain for this group was 2.1%. Why does that matter? Well, “private-sector production and nonsupervisory employees” is a group that comprises four-fifths of the entire work force.

In other words, a small sliver of the work force saw those larger wage gains. For the vast majority of American workers, wage growth is still anemic, barely outrunning official measures of inflation, which was 1.5% in September, according to the most recent CPI report.


(Just one quick correction to Vigna’s numbers: The annualized gain in hourly wages for “private-sector production and nonsupervisory employees” was only 2.4 percent, not 2.5 percent.)

Be sure to keep all of that in mind when you read about “significant” or “promising” wage growth.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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