Last month, the news from the October jobs report was not that the economy added 142,000 jobs that month, but that wages grew rapidly, too: by 11 cents per hour, following 8 cents in September. That may not sound like an incredible amount, but that translates into 3+ percentage wage growth in a given year — well above inflation.
But, I said, people lauding this wage growth should remember that it is still not especially spectacular, and that it would need to be sustained for a number of months to represent a real boom. Lo and behold, while the economy again added a respectable but not incredible number of jobs (178,000 positions) in November, we didn’t sustain the encouraging level of wage growth.
In fact, hourly earnings for all employees fell three cents this month (they rose 2 cents for non-managers).
What’s important is not that tiny shift, exactly — these measurements are not immune to error and one weak month of wage growth is not going to derail the recovery. But it does suggest that people got a little overexcited in October, when it looked like wages were growing at 3–4 percent. That’s not going to happen if, some months, wages shrink a bit or don’t grow at all. In fact, this month’s number was enough to drag down the past year’s average wage growth from 2.8 percent to 2.5 percent.
And 2.8 percent, as I said after October’s report, was nothing amazing: It’s not even as vigorous as the level of wage growth we got during the economic expansion that preceded the 2008 recession (though inflation was higher then).
Cheerleaders of the Obama economy treated last month’s number as a trend that’s likely to continue — and, while it might indeed continue, it didn’t do so in November. The last spike at the end of the chart here is the level of wage growth over the past 12 months that people had gotten so excited about — it ticked back down, from 2.8 to 2.5 percent, this month rather than continuing to rise.
The level it’s at right now, as you can see, is not particularly amazing — it needed to stay at that level for some time, or, better, keep going up.
Here’s hoping that it does, and that this month is a blip. Indeed, there is reason to be optimistic: The labor market ought to continue tightening, as jobs are added at a decent clip. One place that might happen is construction: The sector has added 59,000 jobs over the past three months, mostly in construction. Wage growth there is slightly outpacing the economy overall, but eventually employers are going to have a hard time finding construction workers, and wages should keep rising there.
The bottom line: Wage growth is happening, but after years of barely being there at all, it’s still not blowing the doors off.