Unemployment is at a 50-year low and the economy is doing well on paper. Despite this, wages are growing painfully slowly. What gives?
If you haven’t seen your wages grow in years, you’re far from alone. The most recent jobs report from the Bureau of Labor Statistics revealed that the US added 136,000 non-farm payrolls in September. However, it also revealed that hourly earnings only rose by 2.9% from the same period one year ago. This is the slowest pace of growth recorded since July of 2018.
A low unemployment rate is great for a country’s economy, but slow wage growth represents an economic threat to the national economy. Lower incomes almost always produce lower spending among consumers. This factor often starts a cycle that hurts businesses and eventually threatens employment and investment. These factors in turn lead to slower economic growth, while increasing the risk of a recession.
Again, low unemployment rates are a great sign of economic health, but they don’t tell the whole story. Another worrying metric that’s been revealed recently is a high prime-age participation rate. The prime-age participation rate tracks the percentage of those aged 25 to 54 who are employed as a proportion of those within the range who are available to work. According to the Bureau of Labor Statistics, the prime-age participation rate was 82.6% in September. This rate approaches highs not seen since the 2008 crisis. This latest figure from the BLS means that more prime-aged individuals are trying to enter the workforce. As more of these individuals enter the workforce, there are fewer enticements for employers to provide raises to attract potential employees.