Tags: Recession | Purse | Stringers | Workers | Wage | Growth

Recession-Wary Companies Tighten Purse Strings on Wage Growth

Recession-Wary Companies Tighten Purse Strings on Wage Growth
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By    |   Monday, 22 May 2017 10:21 AM

The recession reportedly has caused lasting damage to the job market, as wage increases have become increasingly rare.

Companies have become “a lot more reticent about making new investments in the wake of the Great Recession” and the weak eight-year economic recovery that has followed it, Business Insider reported.

Steven Partridge, vice president for workforce development at Northern Virginia Community College (NOVA), says the crisis created what he calls "degree inflation" in job requirements.

"The downturn made everyone push up their education requirements,” Partridge told Business Insider. As workers lost their jobs and tried to find new employment, they considered themselves lucky to take lower-paying ones.

Albert Edwards, market strategist at Societe Generale, admits he was wrong about the prospect of imminent wage increases.

"Talking about wrong, I have to put my hands up. I have been expecting U.S. wage inflation to roar ahead over the past three months to well above 3%, yet every data release has surprised on the downside," he wrote in a note to clients.

"Wage inflation, as measured by average hourly earnings, has actually leveled off at close to 2-1⁄2% while wage inflation for ‘the workers’ is actually slowing (see chart below)! Strictly speaking, ‘the workers’ are defined (by the BLS) as “those who are not primarily employed to direct, supervise, or plan the work of others.” Hey, that’s me!"

Fed officials have also struggled to understand the absence of wage increases. In a recent research brief from the San Francisco Fed, staff economist Mary Daly and co-authors reflect on what they see as a surprising trend.

"Standard economic theory tells us that wage growth and unemployment are intimately linked. Wage growth slows when the unemployment rate rises and increases when the unemployment rate falls," they write. "The experience since the Great Recession has been very different."

"This slow wage growth likely reflects recent cyclical and secular shifts in the composition rather than a weak labor market. In particular, while higher-wage baby boomers have been retiring, lower-wage workers sidelined during the recession have been taking new full-time jobs," they said. "Together these two changes have held down measures of wage growth."

For his part, Newsmax Finance Insider Jeff Snyder recently pondered whether stalled wage growth could actually get any worse.

"At any other point in history, the labor market rendezvous with full employment was met with significant and welcome economic improvement. In common sense terms, how could it be any other way?" he recently wrote for Newsmax Finance.

"If the labor market is truly robust, jobs overly plentiful, then labor demand as well as the fruits of that exchange can only be the righteous combination everyone understands as recovery," Snyder wrote.

"The U.S. needs wage growth. There is none to be had. “Reflation” or not, this is an impasse that is far beyond “full employment.” It speaks instead the idea of broken employment."

To be sure, the overall financial situation of U.S. households continues to improve but Americans without a college degree feel they are struggling more compared to a year previously, according to a recent Federal Reserve survey.

The annual survey, which was conducted in October 2016, is now in its fourth year and acts as a temperature check on the financial wellbeing of U.S. families, Reuters reported.

Seventy percent of those surveyed said that they were either "living comfortably" or "doing OK," an improvement from 69 percent the prior year and 62 percent in 2013.

The improving statistics in part reflect a buoyant jobs market. Since the last survey the unemployment rate has declined to 4.4 percent from 5.0 percent, and is now near what many economists would consider full employment.

U.S. stocks have risen as well as home prices, both of which can also contribute to household wealth. However, that masks deep disparities and wage growth has remained sluggish even though the economy has largely recovered from the financial crisis.

Forty percent of respondents with a high school degree or less said they were struggling financially, one percentage point more than in 2015, at a time when those with more education felt their situation had improved. Seventeen percent of those with a college education described themselves the same way.

There were also differences based on race and ethnicity. Fifty-one percent of white adults said they felt better off than their parents compared to 60 percent of black adults and 56 percent of Hispanic respondents.

Former manufacturing towns helped propel President Donald Trump to the White House last November and there have been growing concerns over the lack of well-paying jobs for those without a college degree.

"The survey findings remind us that many American households are struggling financially, including fully 40 percent of those with a high school diploma or less," Federal Reserve Board Governor Lael Brainard said in a statement.

(Newsmax wires services contributed to this report).

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The recession reportedly has caused lasting damage to the job market, as wage increases have become increasingly rare.
Recession, Purse, Stringers, Workers, Wage, Growth
Monday, 22 May 2017 10:21 AM
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