Thursday, December 11, 2014

Here's Why Wages Aren't Rising

It was, for decades, almost an economic truism: whatever direction the unemployment rate took, wage growth went in the other.
When unemployment rose, wage growth stalled. When unemployment fell, wage growth picked up again.
Until recently.
The U.S. economy grew an impressive 3.9 percent last quarter and 4.6 percent in the previous period, and unemployment is the lowest it’s been in six years. Yet wage growth has been paltry: average hourly earnings grew just 2.1 percent in November, barely above the October inflation rate of 1.7 percent—and significantly lower than pre-recession rates that regularly topped 3 percent. This doesn’t bode well for the strength or duration of the recovery: consumers need to earn more if they’re going to spend more.
 

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