Tags: Zentner | wages | economic | recovery

Stagnant Wages Put Damper on Economic Recovery

By    |   Friday, 21 March 2014 11:45 AM

While pockets of Americans are enjoying large wage increases, the bulk aren't, and that's limiting the economy's recovery.

Average hourly earnings rose 2.2 percent in the year through February and just 1.1 percent after inflation.

It will be difficult for the economic expansion to accelerate without better gains, according to The Wall Street Journal. Sluggish wage gains have hampered the consumer sector for years, leading businesses to hold back on hiring and investment.

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"It's been a painfully long process of reparation," Morgan Stanley economist Ellen Zentner tells The Journal.

And the Federal Reserve is paying attention as part of its focus on the job market. Wages are now "signaling weakness in the labor market," Fed Chair Janet Yellen said in her press conference Wednesday, The Journal reports.

To be sure, Zentner thinks that a decline in joblessness will ultimately push wages higher. "As time goes on, slack gets less and less and upward pressure on wages develops," she notes.

Much of the job growth in the recovery so far has come in sectors with low pay, such as retail and food services. Average hourly earnings rose 1.6 percent in the retail industry for the year through February.

Real average hourly earnings rose 0.3 percent last month from January.

But Goldman Sachs economists attribute that gain to the cold weather, Nobel laureate economist Paul Krugman writes in The New York Times. Goldman Sachs explains that hourly earnings typically spike after a cold-weather spell, as the workers kept at home by the weather tend to be lower-paid, hourly workers.

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Economy
While pockets of Americans are enjoying large wage increases, the bulk aren't, and that's limiting the economy's recovery.
Zentner,wages,economic,recovery
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2014-45-21
Friday, 21 March 2014 11:45 AM
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