Jobs return, but wage hikes slow to follow
New government data shows the United States had 5 million job openings at the end of November, the most since 2001 and a sign of the largest job growth since 1999. Yet while the economy continues to recover, wages have remained stagnant.
Among many reasons for the lack of wage growth, performance in the job market was subpar for most of the recovery from the recession, so wages did not gain any traction.
"Even after six years of recovery, we still have relatively high unemployment and low participation in the labor force, which is another way of saying the supply of labor continues to exceed the demand," said Patrick O'Keefe, director of economic research at CohnReznick LLP in Roseland. "We've got a growing economy, but the potential number of workers is still much larger than the jobs that are available."
O'Keefe said American workers are now in a globally competitive environment.
"They are competing with workers in other countries, with lower standards of living and less expensive protections of health and safety," he said. "That competition has extended to the services industry. For years, it was confined to manufacturing."
Is this the new normal?
To some extent, it reflects the changes the economy has gone through, according to O'Keefe.
"Over the long haul, as the economy has become more globally competitive, there have been sources of competition for American workers," he said, "so this subpar performance is probably with us for the foreseeable future."
Nominal earnings have gone up, but when inflation is stripped out of those numbers, there remains a stagnation in terms of workers' spending power.
"Paychecks may show more dollars in them than they did in 2007, but most of that increase has been attributable to inflation rather than to increased purchasing power," O'Keefe said.