America’s job-creation machine, idled by the hurricanes in September, fired back up last month as employers added more than a quarter-million new jobs. But for most workers, stronger wage gains remain elusive.
The government’s latest snapshot of national employment, released Friday, showed that the labor market remains remarkably resilient. Employment snapped back last month with a net addition of a hefty 261,000 jobs, after Hurricanes Harvey and Irma depressed payrolls in September. Workers at restaurants and bars returned to their jobs, and hiring in manufacturing picked up, even as it languished at retailers.
Though last month’s decline in the unemployment rate was due to a large drop in the size of the labor force, measures of unemployment and underemployment have come down significantly this year. The number of employees who are working part time involuntarily — either because they could not find full-time jobs or could not get more hours from their employers — has declined by about 1.1 million from the start of the year.
For those with college degrees, the unemployment figure is now down to a mere 2%. And the jobless rate for those with less than high school diplomas, 5.7% in October, is the lowest in at least 25 years.
“The economy is chugging along,” said Marvin Loh, senior global market strategist at BNY Mellon, an investment services firm. The Federal Reserve, he said, will view the report as consistent with its plans to raise interest rates next month.
And yet, there is little indication that workers are broadly benefiting with higher pay.
Friday’s Labor Department report said that average hourly earnings for all private-sector workers dropped a penny last month, to $26.53, after jumping 12 cents in September. Over the past 12 months, average pay for workers has risen just 2.4%, about the same middling pace as over the last three years.
That wages haven’t accelerated has been a puzzle. It could be because there is more slack in the labor market, meaning more people are available for work than official unemployment statistics would suggest. Some think it’s because younger people replacing the large cohort of older employees are coming in at lower pay rates. There are also more part-timers today than before the recession, and these workers tend to see smaller pay raises than full-time employees, said Cathy Barrera, chief economist for the jobs site ZipRecruiter.
Whatever the reason, many analysts are expecting wage growth to tick higher very soon as the supply of workers continues to thin. Already many employers are struggling to find qualified workers. The retail industry, for example, reported 647,000 openings in August, the most ever for that month.
Jack Kleinhenz, chief economist at the National Retail Federation, agrees that wages are bound to head higher. At the same time, he said, many retailers don’t have much pricing power, thanks in part to competition from online stores. Since reaching a peak employment of 15.9 million in January, the retail industry has shed 101,000 jobs, including 8,300 last month, many at department stores and clothing outlets.
The size of the decline is exaggerated, Kleinhenz said, because some of those lost jobs were actually shifted to warehouses as traditional stores do more business online. For the holiday shopping season, retailers are expected to add up to 550,000 workers in November and December — down from 675,000 in the same period of 2015.
By contrast, U.S. manufacturers have been gathering steam recently. After no new net hiring last year, the manufacturing sector has added 156,000 workers in the last 12 months, including 24,000 in October.
Stronger growth in the global economy has boosted demand and confidence among U.S. manufacturers, as has prospects for a tax overhaul this year. “They’re pretty upbeat about the pro-business environment,” said Chad Moutray, chief economist for the National Assn. of Manufacturers.
Last month there was also strong hiring among higher-paying professional and business services. Healthcare had a solid month as well.
On the whole, the job growth of 261,000 in October was less than the 310,000 that analysts were expecting, but the September payroll change was revised higher — from a loss of 33,000 jobs initially reported to a small gain of 18,000. Job gains for August also proved to be stronger than previously estimated.
Taking the last three months together, employers added on average 162,000 jobs a month. That is down from a monthly average of 177,000 in the first half of this year and 187,000 in 2016.
Analysts expect the economy to keep adding around 150,000 jobs a month, on average, in the near term. That would be well above the roughly 100,000 jobs needed to absorb the increase in the workforce population and keep the unemployment rate from rising.
“More and more people are finding jobs, but it’s not even,” said Jed Kolko, chief economist with employment website Indeed.com. Workers in large metro areas are doing better, he said, and labor markets are growing faster in the South and West where there is greater migration.
“I suspect we’ll continue to see healthy job growth, but at a slower pace as the recovery matures,” Kolko added. “The big question is whether continued growth will translate into higher wages or not.”
