For
the more than 10 million Americans who are out of work, finding a job
is hard. For the 145 million or so who are employed, getting a raise is
even harder.
The
government said on Friday that employers added 113,000 jobs in January,
the second straight month of anemic growth, despite some signs of
strength in the broader economy. The unemployment rate inched down in
January to 6.6 percent, the lowest level since October 2008, from 6.7
percent in December.
But
the report also made plain what many Americans feel in their bones:
Wages are stuck, and barely rose at all in 2013. They were up 1.9
percent last year, or a mere 0.4 percent after accounting for inflation.
Not only was that increase even smaller than the one recorded in 2012,
it was half the normal rate of wage gains in the two decades before the
last recession.
The
stagnation helps explain why many people feel apprehensive even though
the economy grew at a robust pace in the second half of 2013, corporate
profits rose, the stock market boomed and the housing market continued
to gain ground. The issue cuts across the American work force. In fact,
white-collar workers did a bit worse than blue-collar workers last year
in terms of wage growth.
“People
are running in place in terms of their living standards,” said Ethan
Harris, co-head of global economics at Bank of America Merrill Lynch.
“There’s almost no growth in spending power.” As recently as 2008, when
the economy sank deeper into recession and Lehman Brothers collapsed,
wages still managed to rise by 3.5 percent, before inflation. But the
combination of a backlog of workers left behind in the recession’s wake,
as well as productivity gains resulting from new technologies, means
salaries may not rebound anytime soon.
“We
won’t see stronger wage growth until unemployment gets below 6 percent
and we begin adding 200,000 jobs a month,” Mr. Harris predicted.
Friday’s data from the Labor Department shows an economy performing well
below that level, however. The 113,000 jobs that were added in January
fell far short of the 180,000 economists had anticipated, and came after
a particularly weak December. Despite the decline in the jobless rate,
some economists said on Friday that job creation had indeed slowed, in
what might be called a winter wobble for the economy — the cold weather
equivalent of last year’s summer swoon.
Dean
Maki, chief United States economist at Barclays, noted that over the
course of November, December and January, the more reliable three-month
pace of job creation stood at 154,000, roughly 75,000 positions fewer
than employers added in September, October and November. Initially, the
weak report for December was blamed on wintry conditions that inhibited
hiring, but Mr. Maki said a second straight month of disappointing job
gains led him to conclude that the cold and snow could not be blamed
this time.
“I
don’t think we can say weather affected January payrolls,” Mr. Maki
said, noting that the construction sector, for example, bounced back in
January after a weak showing in December. Nevertheless, Mr. Maki and
most other economists said they did not believe the weak numbers for job
creation in December and January would prompt the Federal Reserve to
reverse course on its decision late last year to steadily reduce its
stimulus efforts in 2014.
“This
will get the Fed’s attention, but it won’t affect their trajectory,”
Mr. Maki said. Still, another poor showing for hiring when the next
employment report comes out in early March might prompt a pause among
Fed policy makers at their meeting later that month, especially if other
indicators show a parallel cooling.
Wall
Street shrugged off the unemployment report on Friday, as bullish
investors sent stocks higher, with market indexes finishing higher for
the week after three straight weeks of losses. The Dow Jones industrial
average jumped 165.55 points, or 1.1 percent, to close at 15,794.08. The
Standard & Poor’s 500-stock index gained 23.59 points, or 1.3
percent, finishing at 1,797.02. The Nasdaq surged by 68.74 points, or
1.7 percent, to 4,125.86.
In
bond trading, the price of the benchmark 10-year Treasury note rose
5/32 to 100 18/32, while its yield dropped to 2.69 percent from 2.7
percent late Thursday.
One
reason Wall Street may have looked on the bright side Friday is that
the separate survey of households the Labor Department uses to calculate
the unemployment rate told a different story from the payroll data
survey. It showed a gain of more than 600,000 workers, helping bring
down the unemployment rate.
In
the payroll data survey for January, the public sector held back
overall payrolls, as government employment shrank by 29,000 jobs in
January. Excluding that loss, private employers added 142,000 positions,
a slightly better showing. Several other sectors which had been strong
in recent months — education and health care, as well as retail — also
lost positions, contributing to the overall weakness.
The
falloff in hiring in the health care sector was especially noteworthy.
In December and January together, just 2,600 health care positions were
filled. By contrast, as recently as November, nearly 25,000 health care
workers were added to payrolls.
Although
this area of the economy is undergoing a transformation as President
Obama’s new health care plan is slowly introduced, that is unlikely to
have caused the abrupt slowdown in hiring, said Mr. Harris, the Bank of
America Merrill Lynch economist. If anything, he said, the law should
create new jobs in the sector as health care coverage is expanded, even
if higher costs for some employers result in job cuts elsewhere in the
economy.
As
for retail, which lost nearly 13,000 jobs in January, Mr. Harris said
that some of the reduction could have been because of excess hiring in
December, when stores added nearly 63,000 positions as the holiday
shopping season peaked. The cuts may also have been spurred by weak
results at some retailers, with chains like J. C. Penney announcing
major job cuts last month, and Loehmann’s, the venerable discounter, now
in liquidation.
The
employment-population ratio, which has been falling as more workers
drop out of the job market, edged up 0.2 percentage points, to 58.8
percent in January.
While
salary gains have been muted across the work force, more educated
workers continue to enjoy much better employment options than those with
a high school degree or less. The unemployment rate for college
graduates in January stood at just over 3 percent, compared to 6.5
percent for high school graduates and 9.6 percent for people who lack a
high school diploma.
The
problem for economic growth in general, and wage growth in particular,
is that only one-third of the American work force — 50.4 million out of
155 million — have a college degree or more. By contrast, there are
approximately 73 million workers who have a high school diploma or some
college, and 11 million workers who did not finish high school.
With
many less educated workers chasing a limited number of new jobs,
employers have little reason to increase wages. “It’s just an extremely
competitive environment for workers, where people have little
negotiating power,” Mr. Harris said.
(NYT Feb. 7, 2014)
