The economy is sick.
We just got what was ostensibly a great jobs report: The economy added 252,000 jobs and unemployment fell to 5.6%. We’re moving towards normal.
Wages are not growing. In fact, average hourly earnings were down 5 cents in December, to $US24.57.
Economic theory would have it that as the economy grows and the labour market gets tighter, increasing competition among employers would require them to raise the pay of their employees in order to recruit new ones and keep the old ones.
That’s just not happening.
Wages fell by 0.2% in December. It’s hard to ascribe too much importance to one month’s data point, but the fact is that wages have been more or less flat since they stopped falling after the recession. Let’s look at that chart from Nick Bunker again:
There’s some noise, but every time it looks like there might be some upward pressure on what people are seeing in their paychecks, the number ends up coming down again.
This has huge implications. Employers are basically cutting their employees ability to consume. At the extreme end of this, consider when Walmart held a food drive for its own employees. That may not be what happens everywhere, but lack of wage growth will eventually choke the growing economy.
On the flip side, it’s true that real wages are actually increasing a little bit, since people have more money in their pocket thanks to low oil prices, but who knows how long that will last? It’s no substitute for sustained growth in wages the old fashioned way: by employers paying the people who work for them more.