Economists didn’t see this one coming.
Job growth plummeted in February, while wages kept rising, according to the latest jobs report from the Bureau of Labor Statistics. Employers added only 20,000 new jobs this past month — far below economists’ predictions of about 190,000 new positions. It’s a staggering difference from the average 223,000 jobs added to the economy each month in 2018.
In fact, it’s one of the worst months of job growth since President Donald Trump took office.
That’s not necessarily a bad thing. The jobs report doesn’t explain the drop, but the dramatic change suggests that the US economy is reaching full employment. Here’s another sign of the tightening labor market: The unemployment rate fell in February, from 4 percent to 3.8 percent — which is one of the lowest unemployment rates in the past 50 years.
The latest jobs report is also (mostly) good news for workers. Such a low unemployment rate means that nearly every American who wants to and is able to work has likely snagged a job by now. And those who lose their jobs or decide to leave probably won’t have a hard time finding another position. The data also suggests employers are having difficulty filling open positions as the labor pool continues to shrink — forcing businesses to raise wages to keep and attract workers.
And wages did keep growing in February, a lot faster than they have in recent months.
Private sector workers (excluding farmworkers) got an average 11-cent hourly raise in February, adding up to an average of $27.66 per hour. That has happened only one or two times since Trump took office. In January, average hourly pay only increased 2 cents.
But even an 11-cent increase is on the low side, considering how well the economy is performing. The average US worker hasn’t seen their paycheck get much bigger since the Great Recession, which ended around 2009. In the past 12 months, average pay has increased only 3.4 percent, and that doesn’t even take inflation and cost of living increases into account.
The jobs report does point to a steadily growing economy, with the most new jobs created in the business and health care industries. And inflation is decreasing, which means workers’ paychecks are stretching a bit further.
Paychecks are getting bigger
Slow income growth has been the most persistent problem affecting the US economy in its recovery from the Great Recession. Wages have barely kept up with the cost of living, even as the unemployment rate dropped and the economy expanded.
February’s 11-cent hourly wage hike suggests that the trend may be starting to shift. And because gas prices have been dropping too, the cost of living is going down, so workers are feeling more of a financial cushion.
Over the past year, prices rose, so paychecks had to stretch further. But because of recent falling gas prices, the annual inflation rate has fallen to 1.6 percent, compared to a high of 2.4 percent in 2018 (based on the Consumer Price Index). So when you take inflation into account, workers’ wages grew about 1.8 percent within the past year. That’s much faster than they’ve been growing since the recession started in 2007, but it’s still a pathetic amount compared to the sky-high payouts corporate CEOs are getting.
Frustration over sluggish wage growth has been a major underlying factor behind widespread worker strikes across the country in places like California, Oklahoma, and West Virginia. Congressional Republicans had promised that their massive corporate tax cuts would help the average worker, but the gains have been meager. Voters in some states have forced businesses to give low-paid employees a raise in response.
In November’s midterm elections, for example, voters in Missouri and Arkansas overwhelmingly approved ballot measures that will raise the minimum wage for nearly 1 million workers across both states. And as a result of the recent minimum wage laws, low-wage workers in 19 states got pay raises on January 1.
Next month’s jobs report will show whether the tightening labor market will force employers to hike wages even more — and whether that growth is enough to ease frustration among workers who still struggle to pay their bills.