By Corin Klein
In the wake of recovering from hurricanes in Florida and Texas, October brought on the largest employment surge in recent years. It is becoming increasingly important to understand this growth, and economists, among the many other people, are trying to understand the weak wage growth.
Employers added 261,000 jobs in October, according to the labor department. The growth was attributed to a combination of the post-hurricane rebound with an additional increase of 106,000 jobs. And while the increase is more than the country has seen in over a year, the New York times reports that average hourly earnings were only 2.4 percent higher this October than a year ago, a number that does not reflect the pace of inflation.
Despite the slow wage growth, economists believe the economy as a whole is showing signs of health. The current unemployment rate sits at 4.1 percent, according to the New York times, the lowest it’s been since 2000. Much of this has to do with the strong labor market; a recent government report revealed that gross domestic product rose at a 3 percent annual rate. Retail sales saw significant gains in September, and consumer confidence was at a long-time high. But it’s not only consumers who are helping strengthen the economy. The demand for American goods and services has increased as a result of strong global growth and a weaker dollar, according to the New York Times. Strength beyond that of consumers is reassuring to economists like Brett Ryan of Deutsche Bank in New York, who believes the growth we’re seeing in multiple areas is a sign of economic strength.
With the economy blooming, many are wondering what is causing the slow wage growth. The New York Times reports that average earnings experienced a slowdown, with a 2.4 percent year over year pace of growth, which was larger than expected taking the hurricanes into consideration. Despite predictions of wage growth increasing as unemployment is decreasing, the numbers don’t add up. This is causing disappointment in many people, including Mark Hamrick at bankrate.com who likens the slow growth to a baseball team who will never win the championship. But it’s not all bad. The New York Times reports that by taking things like benefits and cash pay into consideration, the Employment Cost Index was up 2.5 percent, the strongest in over two years.
Along with the slow wage growth, there are certain increases that some industries are seeing. According to the New York Times, mega retailer Target announced a pay raise to a minimum of $11 an hour, with the hopes of increasing it to $15 an hour by 2020. The ability for businesses like Target to improve pay is putting pressure on low-wage establishments, like those in the fast food industry. The New York times reports that establishments like Checkers and Rally’s, a fast food franchise, is working to increase pay through progression, rather than raising base pay wages.
The wage growth issue is stretching to Washington, where Republicans are proposing their own solutions such as lower taxes on businesses. Beyond Washington, companies like cellphone retailer Wireless Zone are struggling to find answers. They are concerned with the restructure of commission before their employees move on to jobs with higher paying base rates as the company’s VP of sales, David Staszewski, tells the New York times.