Job growth is slowing, but the US economy is doing just fine
By Alexia Fernández Campbell | Sep 6, 2019
Job growth slowed again in August, with 130,000 new jobs added to the US economy, compared to 159,000 positions created in July, according to the latest jobs report from the Bureau of Labor Statistics.
The slowdown suggests the severe labor shortage is holding back economic growth. And while an overall drop in job creation this year has fueled panic about a potential economic recession, there’s no evidence in the latest jobs report that a downturn is right around the corner.
In fact, nearly all the data released Friday suggests the US economy is doing just fine.
The unemployment rate, for example, didn’t budge in August at 3.7 percent. That’s still the lowest rate of unemployed Americans recorded since December 1969. More people joined the labor force in August, and wages ticked up again too.
Yet none of this means much to middle- and working-class families: Workers only got an average hourly pay raise of 11 cents in August — two pennies more than the past two months. Job security may be one of the few benefits employees can count on these days.
Nearly every person who wants to work can find a job these days, and those who lose their jobs, or decide to leave, won’t have a hard time finding another position.
But millions of Americans are working part-time jobs when they would rather get full-time gigs, or at least work more hours. The number of people in that group has been mostly shrinking but increased to 4.4 million workers in August.
Companies that provide services to businesses — such as janitors and security guards — created the most jobs last month, followed by the federal government, which has been filling positions for the 2020 census. The healthcare industry added thousands of jobs too. Nurses, physical therapists, and home health aides are in high demand right now.
The average monthly job growth so far in 2019 is about 158,000, a notable drop from the 223,000 positions created on average each month last year. The decrease isn’t alarming; it just suggests the current labor shortage is making it hard for employers to fill all the open positions. There are far more jobs available right now than there are people looking for work.
One thing to note is that these are just the initial estimates — the numbers are usually revised within a few months. For example, the number of new jobs from July was revised down from 164,000 to 159,000.
Businesses are hoarding profits
Even though Americans are finding jobs pretty easily, they still aren’t seeing the so-called economic boom reflected in their pocketbooks.
August was another month with disappointing wage growth. With such a tight labor market and rising productivity, workers should expect much bigger pay raises than they’re getting.
Private sector workers (excluding farmworkers) got an average 11-cent hourly raise, adding up to an average hourly pay of $28.11. In the past 12 months, average hourly earnings have increased by 3.2 percent. That’s a slight uptick from previous months but still represents disappointing pay growth when adjusted for inflation.
The latest pay data suggests that workers are still not benefiting much from the longest economic expansion in US history. Slow income growth has been the weakest part of the US economy in its recovery from the Great Recession. Wage growth has barely outpaced cost-of-living increases, even as the unemployment rate dropped and the economy expanded. August’s 11-cent average hourly wage hike suggests more of the same.
Over the past year, the cost of food and housing has gone up, so paychecks have had to stretch further. The annual inflation rate crept up to 1.8 percent in July, though it’s still far lower than the high of 2.9 percent in July 2018 (based on the Consumer Price Index) for the past seven years. When you take inflation into account, workers’ real wages only grew about 1.4 percent over the past year. This is worth repeating: During the longest economic expansion in US history, with record-low unemployment, workers are only making 1.4 percent more than they did a year ago, after adjusting for inflation.
While paychecks are growing more than they did last year, the numbers are still pitiful when you compare them to the sky-high payouts corporate CEOs are getting. For example, CEOs got an average $500,000 pay bump in 2018, while the average US worker got an extra $1,000 — barely enough to outpace inflation.
Frustration over stagnant wages is also the major underlying factor behind widespread worker strikes across the country in places like California, Illinois, and Missouri. In August, 20,000 AT&T workers went on strike across the South to force the company to negotiate better wages and benefits. After three days on strike, the company agreed to keep bargaining.
In April, 31,000 supermarket employees went on strike in the Northeast to reverse proposed pay cuts and rising insurance premiums. The Stop & Shop strike was the largest private sector work stoppage in years. After eight days with empty supermarkets, the company agreed to scrap its plan.
The widespread labor unrest underscores how the Republican tax cuts did little to help working-class families, despite all the promises from congressional Republicans.
In response, voters in some states have forced businesses to give low-paid employees a raise. In November’s midterm elections, voters in Missouri and Arkansas overwhelmingly approved ballot measures that will raise the minimum wage for nearly 1 million workers across both states. And as a result of the new laws, more than 5 million low-wage workers in 19 states got pay raises on January 1.
Those laws have helped boost wages so far in 2019, but not by much.