NEW YORK (Reuters Breakingviews) - American workers are paying the price for keeping the economic recovery going. U.S. job creation accelerated in April, trimming the unemployment rate to a 50-year low of 3.6 percent. Yet wage growth remains modest and other data suggest slack in the labor market.
In December 2013, Federal Reserve policymakers debated whether unemployment, then a little below 7 percent, was approaching the lowest it could sustainably be and might soon ignite inflation. Since then, almost 14 million more jobs have been created, the jobless rate has halved, and inflation has remained tame.
Some economists still worry over seeing unemployment at the lowest since 1969. That year, after all, was the start of a wage-price spiral that created double-digit inflation in the 1970s. So far, however, there’s no hint of anything like a repeat.
Average hourly earnings are growing at a little over 3 percent a year - a welcome step up from the 2-2.5 percent range that prevailed through President Barack Obama’s second term but far from extravagant or inflationary. With productivity increasing, unit labor costs have been virtually flat over the past year. The core personal consumption expenditures price index, one inflation gauge the Fed tracks, has been under the central bank’s 2 percent target for years, and stood at 1.6 percent in March.
The labor market still has a fair bit of leeway. The percentage of working-age people in employment or looking for a job ticked slightly lower last month, and at 62.8 percent remains more than three points below its pre-financial crisis range. In theory higher wages, like the $15 per hour minimum that Amazon.com and others have adopted, should lure more back.
Still, employees’ share of the economic pie remains historically low even as stock markets flirt with new record highs. They currently collect just over 75 percent of corporate income, compared with more than 80 percent through most of the 1980s, 1990s and early 2000s, according to the Economic Policy Institute.
Capitalists may voice worries about inequality at forums like the Milken Institute’s annual gathering earlier this week, but subdued wages help ensure that the current economic expansion, set to become the longest in U.S. history in July, won’t end any time soon. Workers are taking one for the team.
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