Even though the unemployment rate hasn’t remained steady at such a low rate since the late 1960s, this is not necessarily an indicator of growing wealth. In fact, today, due to an inverse relationship between the employment rate and wage growth, the low unemployment number of 3.9 percent can be quite misleading. Although low unemployment is good, it is only one of quite a few figures that need to change in order for the economy to continue to improve in any measurable way.
First, the numbers
So, the unemployment rate is now 3.9 percent. It is the lowest it has been since 2000. Additionally, 3.9 percent has not been a sustainable unemployment level since the late 1960s. And so, yeah, it is pretty impressive. Over 160,000 jobs were added to the job market last month, with a net increase of 30,000, according to Bloomberg.com
Let’s talk job gains. April marked the 91st month in a row for job increases. This is by far the longest streak ever. Like, ever, ever. “We’ve continued to add jobs routinely every month for so long, and the unemployment rate we have reached is amazing,” said Catherine Barrera, chief economist of the online job site ZipRecruiter. “It’s very incredible.”
Economists have been saying that this unbelievably low unemployment rate should lead to pay bumps for workers. This prediction of wage growth is predicated on the idea that employers will likely be forced to fight over a dwindling number of job candidates. That’s what they say, at least. But we haven’t seen any substantial pay bumps as of yet. To date, this formula for predicting pay increases has not panned out.
“Wage growth is just not picking up as we would have expected at this point,” said Matthew Luzzetti, a senior economist at Deutsche Bank. Wages increased by 2.5 percent last year — barely keeping up with inflation — and the question becomes “How can employers continue to raise pay at such a glacial pace, despite the ever-tightening, ever-dwindling, job-candidacy pool?” After all, the last time the job market looked like this, wages for average positions grew at an annual rate of 4 percent.
What can be done about this?
Because the composition of the labor market is different from what it was in the past, and jobs do not pay as much, the numbers, frankly, are misleading insofar as they can be positively correlated to the nation’s economic well-being.
To delve deeper into the matter, take a look at the city of Nashville, Tennessee for some insight. Nashville’s unemployment rate has remained about stable in line with the national unemployment rate, and yet poverty rates are still high. One answer for this disparity came from Ken Chilton, assistant professor of public administration at Tennessee State University. He notes that, since 2000, the city’s poverty rate has moved from 13 percent to 19.9 percent due to the fact that “the bulk of the jobs created since 2009 have been $20 an hour and less.”
“It seems we have a lot of jobs, but maybe those aren’t great jobs,” said Jason Freeman, co-chairman of Nashville Organized for Action and Hope. Therefore, more economic growth and pro-growth policies need to be created, perhaps by removing an emphasis on pure job creation, and refocusing policy on the quality of jobs, (and especially salaries). Economic and pro-growth policies would be especially welcome due to the fact that they’d increase household incomes and improve the long-run fiscal outlook of the nation.
Alas, 3.9 percent doesn’t mean much right now
High employment rates, although they look real nice on paper, might be misleading in light of the number of low-income jobs. In other words, if a large percentage of the employed populace has a piss-poor take-home pay, then, under these circumstances, the low unemployment rate has no reason to be in-step with a theoretical low-poverty rate. This is exactly what we are seeing today. While people are working, many of their jobs — which are oh- so-easily-acquired — do not pay enough to lift them out of poverty.
In October of last year, San Antonio’s unemployment rate was at 3 percent. That’s way lower than the national, newly-established rate of 3.9 percent. And yet, In 2016, out of 977,580 employees surveyed by the labor bureau in the San Antonio-New Braunfels metropolitan area, about 371,000 employees were listed as living below the poverty line — that is nearly 40 percent!
The dearth of well-paying jobs is what prevents wage-earners from escaping poverty. It is also what renders it more important than ever to put economic growth and job-growth policies in place that can stave off this bizarre anomaly of high unemployment and low wages. Low wages result in slow economic growth and higher levels of poverty.
Policymakers must assess the prospects for future growth and then enact pro-growth policies that are based upon doable — and not unrealistic — predictions for the next few years, if we are to solve this problem. Additionally, policymakers must push for policies that increase economic growth while avoiding policies that would most likely decrease it.
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