This morning’s jobs report showed the economy added a strong 313,000 jobs in February, with widespread gains across all sectors. The unemployment rate held steady at 4.1 percent, while the labor force participation rate (LFPR) and the employment-to-population ratio (EPOP) saw sizeable gains, 0.3 percentage points each, restoring them to levels last seen in September 2017. At 79.3 percent, prime-age EPOP, meanwhile, is the highest it’s been since June 2008. This is promising growth as many workers who found themselves idled by the Great Recession and its aftermath find their way back into the labor market and secure jobs.
Despite these impressive gains in employment and participation, it’s still too soon to declare full employment. Nominal hourly wage growth remains relatively disappointing at 2.6 percent year-over-year, so we clearly have a ways to go before reaching the 3.5 percent wage growth—at a minimum—that would be consistent with the Fed’s inflation target and estimates of potential productivity growth. And it’s important to remember that wage growth doesn’t need to simply hit 3.5 percent in a given month to declare that the job is done. It needs to exceed 3.5 percent for a substantial amount of time for workers to begin to claw back losses in the labor share of income they’ve felt during and since the Great Recession.
There are two hourly wage growth series reported on jobs day, the total private wage series and the production/nonsupervisory wage series, the latter of which roughly constitutes the bottom 82 percent of the workforce. The production/nonsupervisory series continues to be slightly slower, coming in at 2.5 percent over the year—indicating that the top of the wage distribution is continuing to pull away and accelerate faster than what typical workers are experiencing.
What the topline average on Jobs Day misses is that the experience is different across the wage distribution and for different demographic groups. Looking at 2017, we saw private-sector wage growth averaged 2.5 percent, and, using the Current Population Survey Outgoing Rotation Group microdata, we learn that it grew across the entire wage distribution, which means that the benefits of a growing economy are showing up in workers’ paychecks. But, since 2000, large disparities have worsened both between and within demographic groups in the economy. For instance, black-white wage gaps have widened over the last 17 years and the bottom 50 percent of college degreed workers have lower wages today than in 2000. For more demographic details for recent wage trends, see The State of American Wages 2017.