Cross-posted at Reports from the Economic Front.
The good economic news, which got plenty of attention, is that the U.S. economy added over 170,000 new jobs in October. The largely unreported negative news is that average real hourly wages in the private sector declined that month, and have been in decline for most of the past year.
It is hard to remember that the economy has been in expansion since June 2009.
Jeffrey Sparshott, in a Wall Street Journal blog post, offered the following chart of the trend in hourly earnings in private industry, with each point showing the change from a year earlier.
Citing a Labor Department report, Sparshott noted that:
…hours worked were flat [in October] for the fourth straight month. Meanwhile, average hourly earnings for all employees on private payrolls fell by 1 cent to $23.58 in October. Over the past 12 months, earnings have risen a scant 1.6%. That’s not enough to keep up with inflation. The consumer price index was up 2% in September from a year earlier.
It’s even worse for blue-collar workers. Average hourly earnings of private-sector production and nonsupervisory employees edged down by 1 cent to $19.79, only a 1.1% increase over the past year.
The blog post quoted the HSBC’s chief U.S. economist who said:
This is the smallest increase in wages on record for the data going back to 1964. The persistently high level of unemployment over the past few years is clearly restraining wage gains and suppressing any inflationary pressures that might have possibly emanated from the labor market.
It also quoted the chief U.S. economist at J.P. Morgan Chase who said:
This pace of labor income growth may be quite acceptable for corporate profits, but it does pose headwinds for consumer spending growth.
Consumer spending did rise last quarter, helping to boost third quarter U.S. GDP, but this was largely because of a decline in the personal savings rate, which fell from 4.0% in the second quarter to 3.7% in the third.
We clearly don’t have a foundation for a sustained economic recovery, certainly not one that brings benefits to the majority of workers. Instead of talk about austerity we need a real debate about the best way to strength worker bargaining power.
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Martin Hart-Landsberg is a professor of Economics and Director of the Political Economy Program at Lewis and Clark College. You can follow him at Reports from the Economic Front.
Comments 11
Yrro Simyarin — November 7, 2012
The austerity remark seems a bit like a non-sequitor. We haven't tried austerity in the US - we tried a Keynesian stimulus. Which, either because it's a bad theory, we didn't try it hard enough, or we implemented it poorly, did not stop our increased levels of unemployment.
This data is a good argument for the link between unemployment and wages, and a good argument for why we need to increase employment somehow. But it's not really an argument either way on government austerity.
Storm — November 7, 2012
Totally and completely anecdotal, but as a younger person (I'm 23) who has worked at a variety of jobs, from the menial to the professional, for a little over five years now, I've never made more than $11 an hour. The idea of a job that pays enough to live on without assistance from family, a significant other, or the government is almost a mythological creature for me and the people I know, most of whom went to grad school to avoid the job market. One wonders if this is the new normal, rather than some kind of temporary setback.
decius — November 8, 2012
How would increased worker bargaining power allow the same income to support a higher wages, or increase real demand for goods and services?
By how much was the inflationary pressure restrained- how did real earnings change compare to year over year real earnings change for the past time periods?
Vadim McNab — November 9, 2012
Germany does this intentionally.
So it must be good !! right?
Mr. S — November 9, 2012
Isn't the labor force participation rate at its lowest point since 1981? That fact compounds the unemployment numbers even further, despite the number of jobs added.
Also, if average wages are falling, it stands to reason that those new jobs offered relatively low wages, which pulled averages down.
Sconsaul — November 11, 2012
I am a 35 your old woman with an ivy league education
who lost my job three years ago to "company restructure". My position
was eliminated. I have spent these past three years obviously online applying
for jobs. I have watched a job description of Administrative Assistant go from
$12 an hour to $9 and hour, and the job descriptions all read the same. There
are jobs being created – but what kind? Obviously not ones for educated people.
I currently run a kitchen for $11 an hour – which is actually very good pay
considering. But also $15k less then I did before a year, without health
insurance, 2 weeks paid vaca and profit sharing. Yes – my old job was an old
school set up where I got all that for free. You never know what you have until
its gone…..
Suzanne Aurilio — November 15, 2012
The Servant Economy, by economist, Jeff Faux is an excellent analysis of our times, where they came from and where they're heading. It confirmed what I've thought, observed and experienced in the U.S. since 1988. It's not a comforting read, but a necessary one.
http://www.amazon.com/The-Servant-Economy-Americas-Sending/dp/0470182393