This is the hottest job market since the 1990s. Why aren't wages growing faster?
By just about any metric this is the best job market since the late 1990s. The economy has been adding jobs for 110 straight months -- a record streak. Jobs are plentiful. Unemployment is at a half-century low. And the unemployment rate for African-Americans, Hispanics, Asians, and Americans with less than a high school education are all at the lowest levels since the Labor Department began keeping track.
There's a lot to cheer.
But one of the lingering black marks on this strong jobs picture is why wages aren't growing like they did in the late 1990s when yearly wage growth routinely topped 4%.
The latest monthly report card on jobs came out Friday from the Labor Department and shows that the average worker's pay -- known as average hourly earnings -- is up 3.1% in the past year. It's a pretty good number. But it's nowhere near where it was before.
Many hoped this would be the year wages really accelerated. After all, business leaders have been complaining for months they can't find enough workers -- both highly skilled and not -- to fill roles and the natural response to that is usually to bump up pay. But wage growth peaked in February at 3.4% and has pulled back a bit since then, puzzling economists.
"From late 2017 through late 2018, it looked like wage growth was picking up. That ended. Wage growth has been backsliding this year," tweeted economist Heidi Shierholz, senior economist at the left-leaning Economic Policy Institute.
The White House likes to point out that the wage picture looks even better for working class folks. What they mean by that is workers in non-manager roles are actually experiencing faster wage growth than supervisors, a welcome trend to many.
"Skeptics continue to claim that the U.S. economy has run out of steam. Time and time again, they're proven wrong," said Tomas Philipson, acting head of President Donald Trump's Council of Economic Advisers.
Wages for non supervisors are growing at just shy of 3.7%, according to the latest data through November. That's better than for workers overall, but even that figure lags the trend from the late 1990s. It's about half a point less than much of 1997-98 (as well as 2006-07) and there's concern that this metric is also starting to pull back a bit.
Economists keep debating what the heck is going on. Some point to the decline of union membership and the lack of bargaining power for workers now versus in the past. Even beyond unions, there's growing evidence in many cities and towns of a shrinking number of big employers able to control wages in the area and keep them lower. It's a phenomenon in economics known as "monopsony," which is when there is only one buyer (similar to a monopoly, which is when there is only one seller).
Others point out that workers today are interested in more than just hourly pay. They want better benefits and more flexible work schedules and some surveys indicate workers are willing to accept lower pay (or more modest pay increases) in exchange for more time off or the ability to work remotely.
Still others point to the cost of living. Inflation has been very low since the Great Recession, staying below 2% a year. While rent and health care costs continue to rise for many, gas, groceries and other goods have not risen much in price for most. Some say wages do no need to rise as much if inflation remains low (the latest annual inflation rate was 1.8%). But inflation was well below 2% in 1998, a year when wages were around 4%.
What's clear is that the stock market is at record highs and many companies are having another very profitable year, yet the share of the economic "pie" going to workers remains at basically a 70-year low. And it does not show any signs of rebounding, even in a hot job market.
"One thing that really troubles me is the pace of wage growth. Workers are getting a smaller cut of what we produce than they used to," tweeted Betsey Stevenson, associate professor of economics at the University of Michigan. "Everyone thought that a strong labor market would help change that, but worker's share (compared to profits) of GDP remains stubbornly low."