The United States added 211,000 jobs in April, rebounding as expected from a lackluster weather-jinxed March, but although there are a lot of new people with paychecks, those who have been working aren’t seeing very much income growth from the strengthening economy.
The Labor Department’s Bureau of Labor Statistics said average hourly earnings for all employees on private nonfarm payrolls rose by just 7 cents, or 0.3 percent, to $26.19. As low as that was, it represented an improvement from an increase of 2 cents, or 0.1 percent, in March, a figure the department revised downward in its report on Friday. During the past year average hourly earnings have risen by 65 cents, or 2.5 percent. The Washington Post said some economists think employers should by now find themselves in a position where they need to raise the pay they’re offering as the unemployment rate — 4.4 percent — drops and the talent pool shrinks.
“Two hundred thousand for jobs growth is just such a huge number, you’d think we’d get to a point where employers have to raise wages, and we’re still not seeing it,” Tara Sinclair, an economist at George Washington University and a senior fellow at the jobs site Indeed, told the Post.
Lindsey M. Piegza, chief economist at the brokerage firm Stifel Nicolaus & Co., told the Los Angeles Times that a downward trend in wage growth that began in January worries her. Wages were rising at a rate of 2.9 percent for the 12-month period that ended at the close of last year.
“When you talk about reaching that exciting level of 2.9 percent, now we’re down to 2.5 percent,” she said. “That’s really only modestly above what we saw in the aftermath of the Great Recession.”
The Times said economists would like to see wage growth top 3 percent. Gus Faucher, chief economist at the PNC Financial Services Group, told the newspaper that he thinks stronger wage growth is coming.
“When I go out and talk with businesses, a lot of them are having difficulty in recruiting workers, the job market is getting tighter and we still will have upward pressure on wages,” he said.
Some economists say the sizable April job gains make it more likely that the Federal Reserve will raise interest rates again in June, but MarketWatch said that because wage growth is below the 3 percent to 4 percent pace typical at this point in an economic recovery, inflation is unlikely to accelerate.
If the Fed does not see inflation rising enough to be a threat, it is likely to leave rates alone. The central bank has been cautious in its interest-rate decisions since the Great Recession ended in 2010 and a slow recovery began. It continues today.
The concern that economists have about wage growth is tied to spending. Consumers who aren’t seeing more money in their paychecks aren’t likely to buy more goods, especially big-ticket items such as cars and boats.
New U.S. vehicle sales were disappointing in April, prompting concern that the auto industry’s lengthy boom is coming to an end. Autodata said sales of new cars and trucks fell 4.7 percent for the month, to 1.43 million, from the same month last year, the fourth consecutive monthly decline.
On a seasonally adjusted annual basis, the sales rate was 16.92 million. That figure was below forecasts of 17.1 million. Sales at GM fell 5.9 percent, Ford sales dropped 7.1 percent and Fiat Chrysler sales were down 6.9 percent.
“Over the past six months we’ve watched nearly every automaker go from positive to negative sales volume, confirming the plateau in this latest sales cycle,” Karl Brauer, executive publisher for Autotrader and Kelley Blue Book, told the Detroit Free Press.
The newspaper said sales fell for six of the eight top-selling automakers in the United States and that among Asian automakers, sales fell 7 percent for Honda, 4.4 percent for Toyota and 1.5 percent for Nissan. Sales at Hyundai rose 1.3 percent, but they fell 3.8 percent for sister company Kia.
Ford vice president of sales and marketing Mark LaNeve told the Detroit newspaper that the industry’s sales pace was slower than expected throughout April, but he said it’s too soon to conclude that sales will fall more than expected in 2017.
“We have to let the year play out,” LaNeve said. “I am not discouraged by the numbers. I view it as within some kind of normal range in a plateauing industry.”
“When you look at the broader economy, including a strong job market, rising wages, low inflation and low interest rates, and couple them to low fuel prices and strong consumer confidence, you have everything you need for auto sales to … remain at or near historic highs,” GM chief economist Mustafa Mohatarem said.
Reuters said two consecutive weak months of sales have raised fears on Wall Street that the industry is on a downward trend after a long period of rising sales that began after the recession ended.
The Fed’s report on consumer credit for March likely buoyed businesses that are concerned about the mood of the American consumer. The central bank said total consumer credit increased by $16 billion during the month — a seasonally adjusted annual rate of 5.2 percent.
Economists that the Wall Street Journal surveyed predicted a smaller increase of $13 billion. In February consumer spending rose by a revised $13.8 billion, down from an initial estimate of $15.2 billion.
This Friday, the April report on retail sales from the Commerce Department will give businesses an updated look at consumers’ behavior.
MarketWatch said economists’ consensus forecast is that sales overall rose 0.6 percent after slipping 0.2 percent in March and that, excluding motor vehicles, sales rose 0.5 percent. Both would represent solid gains.
Also on Friday the University of Michigan will release its preliminary Consumer Sentiment Index for May. The forecast is for a reading of 97.5, up slightly from April’s 97.0 and the March reading of 96.9.
Steadily rising consumption and a buying public whose confidence remains relatively high would bode well while the country waits to see whether President Donald Trump can get bills through Congress that would cut taxes and jump-start the growth he is trying to achieve.
