Job growth still solid, but wages haven’t caught up

WASHINGTON — The U.S. labor market remained in solid shape last month, adding 157,000 jobs while the unemployment rate ticked down to 3.9 percent and wage growth improved — although workers are still waiting for significant gains in their purchasing power because prices are also rising.

The July job creation report issued Friday by the Labor Department fell well short of analysts’ expectations, but figures for May and June were revised upward by 59,000.

That means the economy is still producing strong payroll gains, averaging 215,000 net new jobs a month, the best since 2015. The unemployment rate is near its lowest point since 2000.

At this stage in a record stretch of job growth that began in 2010, however, all eyes are on wages because they’ve been much slower to recover from the Great Recession.

The numbers there looked good in July, with a major caveat.

Average hourly earnings increased by 7 cents, or 0.3 percent, to $27.05. That was an improvement over a 4-cent gain in June. Wages were up 2.7 percent for the 12 months ended July 31, the same annual pace as the previous month.

President Trump and Republicans have been trumpeting the stronger wage growth as a sign that their policies, particularly the large tax cuts that took effect on Jan. 1, are working.

But they fail to note that prices have been rising along with wages. That means that, after adjusting for inflation, wage growth actually has slowed from its pace in 2015-16.

“‘America First’ means jobs first and wages second. When are corporations flush with cash from massive tax cuts going to give their employees a break?” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

Consider that, while wages are growing at an annual rate of 2.7 percent, the consumer price index for the 12 months ended June 30 was up 2.9 percent. That means the purchasing power of Americans went down during that period.

Mark Hamrick, senior economic analyst at financial information website Bankrate. com, said recent wage growth was disappointing and the lack of a significant uptick when adjusting for inflation is “a point of tension for many Americans,” even as economic growth boomed to a 4.1 percent annual rate in the second quarter of the year. That was the best since 2014.