The month of August 2018 witnessed a positive trend in the American job market. According to the monthly jobs report released by the Labor Department, some 201,000 jobs were added, and the unemployment rate was held at a steady 3.9%.
The average hourly earnings grew 2.9%, which is regarded as the best rate since 2009. However, this number is not adjusted for inflation, meaning employees cannot necessarily buy more than they could have in the past.
The explanation for the hourly earnings growth could be that larger numbers of young people are entering the workforce at lower pay scales, according to CNNmoney. “We’re finally seeing wage gains for some low-paid workers. These include things like baristas, cashiers and bank tellers, and I think that’s helping boost that average wage number,” Andrew Chamberlain, chief economist at the job search site Glassdoor, told CBS MoneyWatch this week.
“The bottom [income] quartile and the bottom decile are moving up faster than everyone else,” said Cathy Barrera, chief economist at the job site ZipRecruiter. “Those numbers to me also reflect some of the anecdotal evidence about there being labor shortages in jobs that require little experience or less education: things like construction, transportation, trucking, or child care.” Liz Ann Sonders, chief investment strategist at Charles Schwab, says, “We don’t think it’s a fluke. We think we are at that stage where the labor market has gotten so tight that you’re going to see upward pressure on wages.”
According to CBS News, there is a steady expansion in the economy, fuelled by tax cuts, confident consumers, greater business investment in equipment and more government spending. The GDP grew at 4.2% between April and June – the highest rate in four years.
“Wages have been lagging for months given the late stage of the expansion, and they’re still nullified by the increase in inflation,” said Robert Frick, corporate economist with Navy Federal Credit Union, in a statement.
“However, given that jobs added are still above 200,000, showing many more Americans want to work, and wages have started to increase about the 2.7% level, we could be entering that sweet spot for workers that’s typical at an expansion’s peak.”
Economists speculated 190,000 jobs to be added, and a dip in unemployment from 3.9% to 3.8%. But unexpected numbers expanded industries, with job growth in health care, education, business, and construction.
Manufacturing and retail saw small losses. The monthly job growth has been the fastest since 2015, with an average of 207,000 jobs added per month. Only about 100,000 jobs must be added at this rate to keep up with population growth. “So far, we seem to be immune from the labor shortage,” said Bill Priemer, CEO of Hyland Software. But the labor participation rate dropped from where it had been in the summer, to 62.7 percent.
Employers are finding difficulty finding workers to fill their open positions. “There’s little reason for the Fed not to pull the rate trigger later this month,” Sal Guatieri, senior economist at BMO Capital Markets, wrote in a note.
