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Mixed Wage Growth Reveals Economy’s Speed Bump

Imagine a world of higher wages 3:31

When cashiers and fry cooks making a few more cents an hour is the bright spot in your economy, that's not great news.

Economists were largely disappointed by March’s growth of 126,000 jobs, about half the pace expected. Much of the month’s growth was concentrated in sectors with lower-than-average wages, and the news on wage growth was mixed, at best.

The left-leaning Economic Policy Institute pointed out that the public sector workforce has not recovered since the recession. “The economy is short 1.8 million public sector jobs,” EPI senior economist Elise Gould wrote in a blog post Friday. (CORRECTION: An earlier version of this story said the economy was short 1.3 million public sector jobs. The correct figure is 1.8 million.)

“Retailers certainly helped keep the March jobs report afloat,” the National Retail Federation’s chief economist Jack Kleinhenz said in a statement on Friday. Employment at general merchandise stores jumped nearly 11 percent from last month, and the NRF said retailers added a total of 23,100 jobs in March.

“It’s discouraging that in the sectors of the economy that are growing consistently, we’re not seeing more wage growth.”

Restaurants also continued a good run, with 9 percent growth for the month. The National Restaurant Association said its industry added jobs in 47 states and Washington, D.C. last year, outpacing overall jobs growth in all but eight states.

“That suggests those sectors remain strong job producers,” said Christine Owens, executive director at the National Employment Law Project. “It’s discouraging that in the sectors of the economy that are growing consistently, we’re not seeing more wage growth.”

Over the past year, wage growth has inched up just over 2 percent overall. Sectors including retail as well as hospitality and leisure have done better than that.

Harder to find people

“I think it’s getting harder and harder for employers to find people they need,” said Andrew Chamberlain, chief economist at jobs site Glassdoor. “Wages adjust very slowly.”

Economists are divided, though, on whether higher pay for low-wage workers reflects an improving labor market or is due to higher minimum wages in several states, as well as moves by big employers of low-wage workers like Wal-Mart, Target, TJ Maxx and McDonald’s to pay employees more.

“When you combine the wage and hour numbers, it was a weak month.”

“Maybe the fact that the market was tightening up a bit made it an opportune time to raise wages,” said Harry Holzer, a public policy professor at Georgetown University, who added that hourly gains in low-wage sectors are partially offset by a drop in the number of hours a week these employees work. “When you combine the wage and hour numbers, it was a weak month,” he said.

Average workweeks for retail and leisure and hospitality workers, which are generally lower than the average to begin with, fell slightly since February to just over 30 and 25 hours, respectively.

The average workweek for all production and nonsupervisory employees in the private sector fell slightly after ticking up, bringing it back to where it was exactly one year ago at 33.7 hours. The number of workers who are only working part-time for economic reasons has barely budged, and the number of people working multiple jobs has risen.

“The income security crisis for people who are working is both low wages and hours that are too few and unpredictable,” Owens said. “They are in a growth sector of the economy but they’re not experiencing the recovery themselves.”