The August jobs numbers released on Friday exceeded expectations and are, in one key area, the best of the economic recovery. The unemployment rate remained a smidge below 4 percent, with the economy adding 200,000 jobs. But the highlight of the report is year-over-year earnings wage growth, which was at 3.9 percent—the highest it has been since 2009.
Wage growth has been a concern in the wake of recession. Even as the economy has improved, wages have stayed flat—as they largely have since the late-1970s. Despite the windfall that many corporations received in the wake of the passage of the $1.5 trillion Tax Cuts and Jobs Act last-December, they have largely refrained from providing their workers with raises. Even in other relatively strong jobs reports, like last month’s, wage growth has been a glaring sore spot. August’s spurt in wage growth is a welcome and long overdue development for workers, millions of whom are struggling despite the fact that this economy is technically performing well.
But there are warning sings. Labor participation is down and has not yet returned to pre-recession levels. As The New York Times’s Neil Irwin noted, there are signs that the economy is straining at capacity and could begin to slow down, particularly if the Federal Reserve continues to hike interest rates which could depress both growth and wages. There are increasing complaints of a labor shortage and the spike in wage growth may be, as Irwin argues, a sign that employers have simply run out of other options.