Call it a mixed bag of a jobs report. On many counts, the news is good: According to the latest monthly release from the Bureau of Labor Statistics, the United States economy added about 222,000 jobs in June, mostly in health care, social assistance, financial services and mining. The unemployment rate remained little changed at 4.4% — rising slightly from 4.3% in the May report — but still an improvement from the first three months of the year.
The big problem for workers is that even while job growth has been solid, increases in Americans’ pay have not been as healthy as expected, said Cathy Barrera, a Cornell professor and economist at ZipRecruiter.
“The types of numbers we’re seeing today are really in line with what we’ve been seeing the past year,” Barrera said. “Jobs added outpaced what we thought it was going to be, unemployment rate is holding very steady at a very low number and wages are growing, but they’re growing slower than where we want them to grow.”
The new BLS report shows wages growing only 0.2%, a notch lower than the expected 0.3%, as the Wall Street Journal noted. That’s odd: With a jobs market this tight, you’d expect employers to feel like they need to pay more in order to retain workers, as Center on Budget’s Jared Bernstein pointed out.
One possible explanation as to why wages aren’t rising? It may have to do with younger workers, Barrera said, who are typically the first to get the boot when a recession hits and the last age group to find work again when the economy turns back around. “Most working age groups have recovered almost entirely from the recession,” Barrera said. “One group that’s still lagging behind are the youngest people who are eligible to be a part of the work force.”
In recent years, an excess of cheap, relatively desperate young workers may have held down wages, Barrera said, but that may be finally changing. Compared to the summer 2016, unemployment rates for workers aged 16 to 34 have notched down — particularly on the younger end. When more workers have jobs they have more leverage.
Is this good news for your money?
While it’s obviously not great for Americans that wages aren’t rising as quickly as expected, University of Michigan economist Justin Wolfers also pointed out on Twitter that the new data suggest the U.S. economy has room to keep heating up. That bodes well for the country’s economic expansion — and for workers hoping to take career risks and seek new opportunities.
“It seems to be sustainable at this point,” said Bankrate economic analyst Mark Hamrick. “It’s respectable and reassuring.”
Still, Hamrick cautioned: “Recovery economies don’t die of old age, but they don’t go on forever.” Indeed, if you’re not getting raises at the moment, then you’re going to be more likely to feel the pinch if the Federal Reserve continues to decide to raise interest rates back to pre-Recession levels.
Raising interest rates makes it more expensive to borrow money. That makes carrying a balance on your credit card more expensive, and can also make homeownership less affordable. After all, it’s hard on consumers when real estate gets pricier as wages stay flat, said realtor.com senior economist Joseph Kirchner in an email.
“Homes will continue to get less and less affordable,” Kirchner said. “That decline in affordability — already a major problem — will especially hurt low to moderate income households, millennials and other first-time buyers.”
A final matter to consider? With this economy, Hamrick noted that “your results may vary” from city to city, and if you’re a worker in a place or industry that’s doing well you have “every reason” to expect more robust wage growth in the future. Feeling flexible and want to consider your options? Here are a few cities where young workers and homeowners are finding financial success.
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