Most Paychecks Have Yet to Feel The Recovery
The winter of our jobs discontent is over, and the recovery is back to chugging along like it was before.
That’s the good and bad news. Before we get to it, though, let’s rewind a little bit. At the end of last year, it looked like the recovery was finally starting to hit a higher gear when it added an average of 324,000 jobs a month. But just as this had begun, it was over. The stronger dollar made our exports less competitive, and another brutal winter kept shoppers at home and construction workers from building homes. It was enough that the economy probably shrank at the start of the year and hiring all but came to a halt — just 86,000 in total — in March. The question, then, was whether this was a fluke or the future.
Well, it’s looking like, if not a fluke, at least a one-off. The economy added 223,000 jobs in April, just a little less than the 230,000 that were expected, but did lose 39,000 in revisions to previous months. Add it all up, and the unemployment rate actually ticked down from 5.5 to 5.4 percent, even as the labor force grew by 166,000. It fell, in other words, for the good reason that people were finding jobs, and not the bad one that they’d given up looking for them.
Now the optimistic way of looking at this is that the economy is back to slow and steady growth that’s not too slow or too steady to not bring down unemployment. Indeed, the best model we have thinks that, at our current pace, unemployment will drop to 4.5 percent by September (although it was overly aggressive with its prediction that joblessness would fall to 5.2 percent this month). But the less optimistic way of looking at this is that the economy is back to, well, slow and steady growth. The 191,000 jobs added on average the last three months are about as many as we added between 2011 and 2013. So if our winter slowdown was just an aberration, our autumn acceleration might have been, too. There’s one place the recovery still hasn’t reached, though. That’s workers’ paychecks. Average hourly earnings were only up 3 cents in April, and were basically unchanged up 2.2 percent in the last year. That’s a little surprising considering how much unemployment has fallen — although the Employment Cost Index disagrees, saying wages have gone up 2.7 percent — but maybe not too much when you think about how much shadow unemployment is still left. That tells us that not only isn’t there any pressure on the Federal Reserve to raise rates, but that there’s also plenty of room for the recovery to keep growing — as long as we let it.
The little recovery that could might be a boring story, but better that than one that’s already over. This one still has a ways to go.