The Building Tradesman Newspaper

Friday, June 15, 2018

Employment rate is great; but wages could use some juice

By The Building Tradesman

The U.S. economy overall seems to be doing quite well. The U.S. construction industry - even better. Still, the nation's tepid growth in wages is acting as an anchor on economic growth.

The federal jobs reports for May was released June 1 and revealed that the U.S. unemployment rate dropped last month to 3.8 percent, with businesses creating 218,000 jobs. There were 6.065 million unemployed in May - 281,000 fewer than in April, and some economists would argue that at that rate, nearly everyone in the country who wants to work is probably working. The news is even better for construction - it's an industry struggling to fill positions but saw employment up by 25,000 jobs in May and by 286,000 over the previous 12 months. 

"This past Friday, the U.S. unemployment rate fell to an astounding 3.8 percent," wrote Jeff Spross in The Week. "For a little perspective, it's only gotten that low twice in the last 50 years: once in 2000, and also in the period from 1968 to 1970. But if you suggested to most Americans that the economy is just as healthy today as it was in 2000 or 1968, they'd probably laugh in your face."

Among the reasons cited by Spross for the lack of confidence: nagging wage inequality between the haves and the have-nots. He said the top 1 percent of wage earners gobbled up around 10 percent of all national income in 1968, 15 percent in 2000 - and 20 percent today.

“Here's a summary of today’s jobs report: The jobs numbers are good, BUT WAGES ARE NOT,” Economic Policy Institute senior analyst Heidi Shierholz tweeted, with her using the capital letters. Her colleague, Elise Gould, tweeted: “Wages grew 2.7 percent over the year. Wage growth has been remarkably flat since the end of 2015…In a full employment economy, wages should rise much faster — closer to 3.5 percent and above — to claw back losses to labor (wage) share in the aftermath of the GR.” GR stands for the Great Recession, which began in 2008.

Gould said about two-thirds of the drop in the unemployment rate in May was because workers found jobs, while about one-third of the drop was from people leaving the labor force.

Construction wage hikes have been better than those in the rest of the economy. Average hourly earnings in the industry were $29.65 in May, an increase of 3.2 percent compared to 12 months prior. That put the average hourly earnings in construction 10.1 percent higher than the average for all non-farm private-sector jobs, where the 2.7 percent rise amounted to an average hourly wage of $26.92.

"Construction workers and their employers are clearly benefiting from steps Congress and the administration are taking to boost economic demand," said Stephen E. Sandherr, the Associated General Contractors' chief executive officer. "Construction pay, employment and demand have all increased as business conditions have improved."

The AGC said construction unemployment hit one of the lowest levels on record. They noted that the unemployment rate in construction decreased from 5.3 percent a year ago to 4.4 percent last month, the lowest rate of unemployment since July 2000. The number of unemployed job seekers with recent construction experience has plummeted 87,000 since May 2017.

AGC officials noted that construction employers have added 337,000 new jobs since January of 2017, thanks in part to improving business conditions and growing demand. 

For the economy overall, it's a sign of the times that as usual, the lowest-paying areas of the service sector were among the leaders in job gains for the month, with health care adding 17,900 jobs, bars and restaurants, 17,600, and retail trade, 31,100. 

There are all sorts of economic theories as to why wages aren't following the typical pattern of rising as unemployment falls: workers aren’t becoming more productive, industries are too concentrated among fewer employers competing for talent, decreased union membership, competition from cheaper labor overseas, and more of the economic pie going to higher-paid CEOs.