Friday, March 6, 2015

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US Economy Added 295000 Jobs in February, but Wages Continued to Lag - New York Times




Cutting and removing ice from East Lake Winona in Winona, Minn., last month. Economists have been generally positive about the state of the nation’s recovery from the recession. Andrew Link/Winona Daily News, via Associated Press

The economy gained fresh momentum last month as the Labor Department reported on Friday that employers added 295,000 workers in February, far exceeding expectations, and the unemployment rate took another dip. But wage gains continued to lag, rising only 2 percent from a year earlier.


The unemployment rate fell to 5.5 percent, its lowest since mid-2008, down from 5.7 percent in January. Last month, wages rose just 0.1 percent, according to the Labor Department, a disappointment coming off an increase of 0.5 percent in January.


Despite the disappointing wage numbers, the report prompted a new round of optimism about the economy’s recovery and spurred more talk on Wall Street that the Federal Reserve might raise interest rates at its June meeting rather than wait until September. The news prompted a rise Friday morning in the yield on 10-year bonds and a dip in the stock market, where investors fear that higher interest rates will take a bite out of corporate profits.


“We were all on guard for signs of a February freeze-up, but this is a barn burner of a jobs report,” said Mark Hamrick, an analyst at the personal finance site Bankrate.com. “The Fed will say the pieces are coming together.”


Job growth last month came particularly from the service sector, with leisure and hospitality adding 66,000 jobs, as well as an expansion of 54,000 jobs in education and health. Construction added 29,000 jobs in February, while manufacturing increased by just 8,000.


Still, one consistently dark patch in the recovery has been the sluggish growth of wages. Average hourly wages for private-sector workers have been rising slowly, at around 2 percent annually, for the last few years.


Slow wage growth suggests that the economy is still far from returning to its potential and is a big factor behind the feeling of many Americans that the recovery has left them behind.


At the same time, millions of potential workers remain detached from the job market. The labor force participation rate fell slightly, dropping to 62.8 percent, from 62.9 percent.




“While there have been small moves on a monthly basis, the bigger picture is that the participation rate has been little changed for months and is still hovering around lows not seen since 1978,” Joshua Shapiro, chief economist for MFR Inc., wrote in a note to clients. “Conditions in the labor market are worse than indicated by the reported steep drop we have been seeing in the unemployment rate.”


But with the economy powering ahead at a rapid clip, many economists say it is only a matter of time before wages start to increase at a faster pace as the job market tightens.


“We’re facing a turning point, and we’re going to see more pressure on wages,” said Tara Sinclair, chief economist at the job search site Indeed.com.


Mark Zandi, chief economist at Moody’s Analytics, said current wage growth data appeared gloomier than the underlying reality, in part because of demographic factors. As well-paid baby boomers enter retirement, to be replaced by younger workers starting out at lower salaries, he said, the overall wage pattern has tilted slightly lower. Also, people who have been out of work for long stretches are starting to come back into the labor force and accepting lower wages.


“That’s biasing down the measure of wage growth,” Mr. Zandi said.


But there is growing evidence, he said, that an improvement is underway. One indication is the growing number of younger workers changing jobs as they gain more confidence in their prospects. On average, workers who switch jobs get a 14 percent pay increase in their new salaries.


Paradoxically, Mr. Zandi cited the labor dispute at West Coast ports and strikes at refineries as good news for the economy.



“You don’t see those kinds of actions in a labor market that’s weakening,” Mr. Zandi said.


Another positive sign for wages is coming from the retail sector. Last month, Walmart said it planned to raise its minimum hourly pay to $9 and lift it to $10 next year. TJX Companies, which owns Marshalls and T.J. Maxx, announced similar raises. Also, state and local legislation in past months has raised the minimum wage in numerous regions.


Labor Secretary Thomas E. Perez called all those moves “a shot in the arm.”


“As we continue to have month after month of significant job growth, what we will see invariably is a tighter labor market,” Mr. Perez said in a telephone interview. “And tighter labor markets mean higher wages.”


But labor advocates like the National Employment Law Project say retailers should also be focusing on adding hours as well as lifting pay for some workers. The Labor Department data for February showed the number of workers who said they were working part time for economic reasons fell, leaving their share of all part-time workers at 25.1 percent, down from 25.6 percent in the previous month.


Workers groups say too many people — many of whom are women, specifically women from minority groups — are working part time and would rather be employed full time.


“In addition to paying a fair wage, retailers like Walmart need to provide their work force with stable hours and predictable schedules that allow people to pay their bills, plan their lives and care for loved ones,” Christine Owens, executive director of the National Employment Law Project, said in a release this week.


Shannon Henderson, 29, works part time in customer service at a Walmart store in Sacramento, and supports two children with her $10-an-hour wages. Her hours are unpredictable, often interfering with her breast-feeding schedule for her 9-month-old. She wants to work more but said the company did not have more full-time positions.


If Ms. Henderson worked full time, she said, she might be able to afford a car. For now, she said, “I don’t make enough money.”









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