Why raises are elusive even with unemployment so low
With U.S. unemployment at a 17-year low and businesses complaining that they can’t fill jobs, you might expect pay to be rising sharply as companies try to attract or keep workers.
It’s not. The October jobs report showed that pay gains remain sluggish, and the explanations include weak worker productivity and a still-low proportion of adults with jobs. These are long-running trends that still bedevil the economy despite its steady improvement.
Employers added a solid 261,000 jobs last month, the government said Friday, in part because many businesses in Texas and Florida re-opened after having been forced to shut down in September when Hurricanes Harvey and Irma struck.
The unemployment rate reached 4.1 percent, the lowest level in nearly 17 years, from 4.2 percent in September. But the rate dropped for a less-than-encouraging reason: Many people stopped looking for work and so were no longer counted as unemployed.
Normally, with the unemployment rate ultra-low, businesses are forced to raise pay significantly to fill jobs or to retain existing employees. The last time the jobless rate was this low, in 2000, average hourly pay was surging at a 4 percent annual pace.
Then was then. In October, by contrast, wages crept up just 2.4 percent from a year earlier, the government said Friday. Though that’s double the pace of five years ago, it’s nearly a half-point less than the year-over-year rate in September.
Jed Kolko, chief economist at Indeed, the job listing website, notes that the proportion of adults with jobs remains below pre-recession levels. That raises the possibility that there are more Americans available to work than the unemployment rate suggests. It also means that if employers can hire them, they may not feel pressure to raise pay.