Slow job growth worries financial markets
American workers have begun to see a notable pickup in their paychecks after years of stagnation, with wages increasing at their fastest rate since the end of the Great Recession.
Government data released Friday showed that average earnings spiked 12 cents an hour in January, the second-biggest jump in at least a decade. As a result, wages have risen at an annualized rate of 2.9 percent over the past six months.
Still, the question remains whether those gains will be sustained or will prove to be another blip in the nation's bumpy economic recovery. Hiring surged at the end of last year, giving workers more leverage to seek better wages. But Friday's data also showed that job growth slowed in January to 151,000 positions - a solid number but less than analysts had expected.
The unemployment rate dipped to 4.9 percent, a milestone in the nation's recovery since unemployment peaked at 10 percent during the recession.
"This is very consistent with a recovery that's moving in the right direction," Labor Secretary Thomas Perez said in an interview. "We're getting close to the summit of the mountain, but we're not yet there."
Financial markets reacted badly to the news, with the Standard & Poor's 500-stock index falling 35.4 points, or 1.9 percent, to 1880.05 and the technology-heavy Nasdaq composite index plunging 146.42 points, or 3.25 percent, to 4363.14. The Dow Jones industrial average also fell nearly 212 points, or 1.3 percent.
Investors' anxieties may have been driven by different, and potentially conflicting, concerns: that job growth was slowing, indicating a softer economy, and that higher wages would spur inflation, leading the Federal Reserve to raise rates.
Before the recession, wages were growing at an annual rate of about 3.5 percent. But then millions of workers lost their jobs and the jobless rate skyrocketed. Since 2010, wage growth has flatlined at roughly 2 percent despite a dramatic drop in unemployment.
That stubborn stagnation has exacerbated the country's rising inequality in wealth and income. Workers' wages remained stuck even as U.S. stock markets notched record highs in recent years. Weak hourly earnings also signaled to some economists that America's work force was still in distress.
January's data showed little change for several of the hardest-hit corners of the job market. About 2.1 million people have been out of work for six months or longer, about the same number as in June. Another 6 million have part-time jobs but would prefer full-time work. Hundreds of thousands have become so discouraged by their job prospects that they have stopped looking.
One key measure did show some improvement: The size of the work force increased slightly, nudging the participation rate up to 62.7 percent after falling last year to the lowest level in a generation.
"Job creation and wage growth need to be far stronger, and they need to remain strong for a longer period of time, before the economy is close to full employment," said Elise Gould, senior economist at the left-leaning Economic Policy Institute. Still, the recent wage gains, capped by the surprising uptick in January, provide some reassurance that the American recovery remains healthy in the face of turmoil in global financial markets at the start of the year. Expectations for world economic growth have dimmed, and fears are rising that weakness overseas - particularly in China - could spill over onto U.S. shores.