Why pay raises are elusive even with low unemployment
WASHINGTON — With U.S. unemployment at a 17-year low and businesses complaining that they can’t fill jobs, you might expect pay to be rising sharply as companies try to attract or keep workers.
It’s not. The October jobs report showed that pay gains remain sluggish, and the explanations include weak worker productivity and a still-low proportion of adults with jobs. These are long-running trends that still bedevil the economy despite its steady improvement.
Employers added a solid 261,000 jobs last month, the government said Friday, in part because many businesses in Texas and Florida re-opened after having been forced to shut down in September when Hurricanes Harvey and Irma struck.
The unemployment rate reached 4.1 percent, the lowest level in nearly 17 years, from 4.2 percent in September. But the rate dropped for a less-thanencouraging reason: Many stopped looking for work and so were no longer counted as unemployed.
Normally, with the unemployment rate ultralow, businesses are forced to raise pay significantly to fill jobs or to retain existing employees. The last time the jobless rate was this low, in 2000, average hourly pay was surging at a 4 percent annual pace.
Then was then. In October, by contrast, wages crept up just 2.4 percent from a year earlier, the government said Friday.
It’s particularly surprising given that some employers say they’re desperate to hire. Mike Bolen, CEO of McCarthy Building Cos. in St. Louis, said he needs more electricians, carpenters, and laborers, as well as engineers, marketing and IT support.
Four years ago, there would be about 30 potential employees in a union hall waiting for job postings, he said. Now, the halls are empty, and there are posted jobs with no takers.
Bolen is working with high schools and community colleges to train and recruit young people. He says he’s raised pay in recent years and offers attractive wages: An entrylevel laborer in Denver can start at $16 to $20 an hour and earn up to $30 after one year.
Homebuilders also say they would construct more homes — which could relieve a housing shortage that is depressing sales — if they could find more workers. Still, the construction industry as a whole isn’t raising pay much: Wages rose just 2.2 percent in October from a year earlier, Friday’s report showed. That’s even lower than the economy-wide average.
Reed Nyffeler, CEO of Signal 88 Security, is similarly frustrated. He says job applications have fallen 90 percent since the recession. The company, which provides security in 200 U.S. markets, needs security officers and professional staff.
Signal 88 has raised starting pay for security officers from $9.25 an hour to $11.25 in the past two years. But other low-wage employers have also lifted pay, Nyffeler said, thereby creating new competition for Signal.
Many potential applicants can’t pass drug tests, Nyffeler says, while others can live off government benefits.
His ability to raise pay, Nyffeler says, is limited because his clients are reluctant to pay more for his company’s services. Signal 88 bills at $17 an hour, on average.