“That we’ve had the unemployment rate at or below 4% since last February is obviously historically remarkable,” said Mark Hamrick, senior economic analyst at Bankrate.com. “But the composition of the workforce or employment obviously paints a much more complicated story.”
What troubles analysts like Hamrick, as well as the central bankers at the Federal Reserve, is the fact that the US economy is now dominated by high skill, high wage jobs and low skill, low wage jobs. Gone are many of the middle skill, middle wage jobs and that, said Hamrick, a trend that has led to “not only the economic divisiveness of our country but to some degree the political divisiveness”. Take manufacturing for example, where about 25% of jobs have disappeared over the last two decades thanks to globalization and automation.
It isn’t just middle wage jobs that are missing from this job market. There is also the mystery of stagnant wages. Even as jobs were added, the one thing that remained mostly the same for large part of those 100 months were the wages. In December, wages were up 3.2% from a year earlier, their largest gain since 2008 but nothing to boast about. In January growth slipped to 3.1%. According to the Economic Policy Institute (EPI), a left-leaning thinktank, wages would have to grow between 3.5% to 4% for average workers to really feel an impact.
The wage growth figures, particularly in the early part of the recovery, should have come with “a sad trombone sound effect” said Hamrick. That low wage growth will be one of the main things people remember about this recovery, he added.