Looking Ahead To Friday's Unemployment Report

Steve Inskeep talks to David Wessel, economics editor of The Wall Street Journal, for a preview of what Friday's jobs report is likely to say about the U.S. economy. The stock market is setting records and though profits are up, wages are stagnant.

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DAVID GREENE, HOST:

Here's the good economic news: Corporate profits are up, the stock market is up 11 percent so far this year, and forecasters say the U.S. economy probably grew faster in the first quarter than in any quarter since 2009.

STEVE INSKEEP, HOST:

And here's the other economic news. Wages are not going up. Today's Business Bottom-Line is an effort to find out why. David Wessel is here to help. He's economic editor of The Wall Street Journal and a regular guest on this program.

David, welcome back.

DAVID WESSEL: Good morning.

INSKEEP: OK, so what's wrong with people's wages?

WESSEL: They're not going up. We got some fresh numbers for March, tomorrow, from the Labor Department. But if you look at private sector workers, the trend is pretty clear. These are people who on average earn about 50 grand a year.

Over the past year, average hourly earnings have just barely beat inflation, up about one-tenth of a percentage point faster the inflation rate. And if you take broader measures of compensation that count the cost of health insurance and stuff like that, they're up about the same; barely keeping up with inflation.

INSKEEP: And that is particularly bad, isn't it David? Because this comes after a period of years, maybe a decade, where people's wages have actually gone down.

WESSEL: For many people that's exactly the right. I mean, the problem is that there's more than one reason why people haven't seen raises. But the bottom-line is, as you say, their paychecks are not going up.

INSKEEP: Why?

WESSEL: Well, one is that we still have a lot of unemployed workers. That means many employers don't have to raise wages, if they want to hire. Even though the jobless rate has been coming down, there's still 12 million out of work and looking for work. There're eight million people working part-time who say they can't find a full-time job.

Another reason is that a lot of the jobs that have been created are very low wage jobs - that drags down the average. The average wage for new hires has actually been declining since 2010, not holding constant with inflation.

INSKEEP: OK, so we have a situation, probably, where a lot of people have lost their old higher paying job, and have finally had to give in and accept a lower paying job. That's part of this picture, I suppose.

WESSEL: Exactly. Exactly. And the other thing is going on, to the extent that people are getting wages, more of the wages are going to the high-end workers. Over the past four years, the best paid workers, the one in that top 10 percent here, has seen their wage increases at twice the rate of people in the middle, and four times the rate of people at the very bottom.

INSKEEP: Which is a brutal sorting process that people have traced for decades; the top performing people or the people who are seen as the most valuable are getting more and more, while others stagnant or get less.

But let me just ask you, David Wessel. We are in this period where the stock market is going up, where the economy is growing, where there seems to be more money around. Should some of that be spreading to people at the lower end of the scale?

WESSEL: You'd think so. That doesn't happen except when the labor market is really tight, when the people who are hiring low-wage workers have no choice but to bid up wages. Basically what's happening is, the economy is growing, there is more income in it but a growing share of that is going to profits.

The workers share of income in the U.S. was remarkably stable, from the end of World War II to the early 2000s. But since then it's been falling and is now the lowest level in more than half a century. And the president's economic report, which came out recently, suggested this reflects a combination of factors: technology, globalization, declining clout of unions in the U.S., and so forth.

INSKEEP: When you say globalization, this makes me wonder if other countries have the same trend.

WESSEL: It varies by country. In China, wages are going up because employers are finding it hard to fill jobs. In Germany, which is doing much better than other European countries, there's a lot of pressure to raise wages 'cause productivity has gone up and wages haven't. But in the weaker economies, it's not happening at all. In Spain, for instance, unemployment is 25 percent and wages are falling.

INSKEEP: OK, David, thanks as always.

WESSEL: You're welcome.

INSKEEP: That's David Wessel, economics editor of The Wall Street Journal.

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INSKEEP: It's MORNING EDITION from NPR News.

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