Hiring bounced back in April after a terrible March, but wage growth still disappoints.
“Last month’s job numbers were a bump in the road,” said Andrew Chamberlain, chief economist at jobs site Glassdoor. “When you take a broader view… the fundamentals underlying the labor market are still very strong.”
March's unpleasant surprise — half the jobs economists expected, later revised down even further — was a one-off blip, experts say. But the benchmark unemployment rate, at 5.4 percent in April, masks a less-healthy recovery for two other important job-related metrics: the labor force participation rate and the number of long-term unemployed.
“We’re really not getting labor force participation up appreciably,” said AFL-CIO chief economist Bill Spriggs. “We’re still essentially flying just above the treetops.”
The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, rose 0.1 percentage point to 62.8 percent. But that was just up from a 36-year low. Average hourly earnings rose 2.2 percent from a year ago, although only by 3 cents to $24.87 from March.
These two factors are culprits for the stubbornly slow wage growth that frustrates economists and policymakers— not to mention workers.
“We’re still essentially flying just above the treetops.”
“I think we’re all expecting and really eager to see more pressure on wages,” said Melissa Kearney director of Brookings Institution’s Hamilton Project policy group. “There’s still slack in the labor market.”
Over the past year, long-term unemployment has improved a little bit, but people out of work for 27 weeks or longer still make up almost 30 percent of unemployed workers, while the labor force participation rate really hasn’t budged at all in the past year.
“These days, as important if not, in some cases, more important, is how the wages are looking,” said Mark Hamrick, Washington bureau chief at Bankrate.com. “Here we are eight years later, median household income has not yet gotten back to the peak of 2007… People are still recovering.”
There might be a light at the end of the tunnel, though. Maury Harris, managing director and chief U.S. economist at UBS, said wage growth could pick up as employers start raising wages for better-paying jobs. “Up until recently the low-wage jobs were increasing more than the high wage jobs,” he said. “However, over the last 12 months, that differential has narrowed… High-wage jobs are rising almost as fast as the low wage jobs.”
This could be the break America needs. “Wage growth is finally accelerating,” said Moody’s Mark Zandi chief economist. “That’s going to become much clearer in the months ahead. That’s a big plus for the economy… and our collective psyches,” he said. Since so much of our economy relies on consumer spending, the confidence boost fatter paychecks deliver has a direct impact.
“It’s really about pay,” Zandi said.
-- Reuters and CNBC contributed to this report.