The Bureau of Labor Statistics will be out with its latest monthly jobs report Friday. Expert consensus suggests that the economy generated somewhere between 135,000 and 150,000 seasonally adjusted additional jobs in January, which would be a weak showing barely keeping up with growth in the working-age population. That's pretty much what's been happening since the late summer of 2010 when the Census job layoffs ended. Some 6.1 million fewer workers are on the job than was the case in December 2007 when the recession officially began, and at least another 4 million jobs that should have been added to absorb increases in the working-age population have failed to materialize. And then there are the underemployed.
As if this weren't troubling enough, the BLS released another mostly unnoticed report on Tuesday. It showed that Americans who do have a job increased their wages and salaries on average by a paltry 1.4 percent in 2011. Inflation for the year was 3.2 per cent. Which means real wages fell 1.8 percent. A year ago, the situation was ever-so-slightly better: a 1.8 percent increase in wages and salaries with a 1.5 percent inflation rate. You could call that breaking even, but the trend is certainly not even that good.
It's not hard to figure out why. Unemployment is still extremely high 49 months after the recession began.
Even as the jobless rate falls from recession highs—dropping to 8.5 percent in December—the large number of unemployed people willing to work for less has pushed down wages, said Gary Burtless, a labor economist at the Brookings Institution.
"There's never been a postwar era in which unemployment has been this high for this long," Burtless said. "Workers are in a very weak bargaining position."
Even employers who would like to give their employees raises are constrained by the weak demand for their products, which is a vicious-circle function of high unemployment. People without jobs buy less. For most employers, however, the unemployment situation gives them a terrific advantage when anybody asks for a raise. And when they have an opening, they can offer less upfront, something many job-seekers have discovered during the economic downturn when they take a new job at far less than they were previously paid.
There are, after all, 4.2 Americans in the queue for every job opening. If you don't like what you're paid, somebody else will work for your wages. And they'll work harder, doing "more for less," as the managment seminars all advise their participants to tell subordinates. Thus, workers who do have jobs mostly stay put and keep their mouths shut, hoping for better days.
That could be a long time. According to Mark Vitner, senior economist at Wells Fargo Securities, the relatively soft retail spending at the end of the holiday season came about because most newly created jobs pay close to the minimum wage. In fact, he said 77 percent of jobs created since July 2009 have been in low-paying sectors of retail, leisure and hospitality, home health care and temporary staffing.
As a consequence, the overall rise in spending that did occur during the holiday season was driven not by higher earnings but by consumers digging into their savings. That, combined with lower real wages, is an unsustainable trajectory.