Jobs Numbers Good, Wage Numbers Bad

Job openings were plentiful in November nationwide. wages, on the other hand, rose at a snail's pace if at all in 2014.

At the end of November, there will 5 million job openings nationwide, more than 20 percent more than a year earlier. That’s the *latest number* from the Bureau of Labor Statistics, and it’s another positive indicator for the direction of the economy. The more job openings, the better, since that means businesses are hiring and possibly – just possibly – feeling the need to pay more than they have in recent years, which is still the missing piece of the puzzle for a full, bone fide U.S. recovery.

Another recent BLS number shows the problem: In 2014, average earnings rose only by 1.7 percent, or about enough to keep up with inflation (and in December, wages actually fell a little). Until there’s more progress on wage growth, anemic wages are going to act as a drag on certain real estate sectors: multi-family rents, for instance, which have done terrifically in recent years, probably have only so much more runway without an increases in renters’ wages.

Why aren’t wages rising? Economists’ opinions on the matter vary (if you put all the world’s economists together end-to-end, they wouldn’t reach a conclusion). One idea is that the current unemployment rate isn’t low enough to put upward pressure on wages – 5.4 percent is swell, but that’s only the highline number. A lot of other non-working people aren’t counted in that number, which the BLS calls U-3. The much higher U-6, which counts everyone who doesn’t have a job, or has a part-time job they don’t want, is arguably a more accurate predictor of upward wage pressure. The U-6 has gotten better in recent years, but it’s still pretty high at 11.2 percent.

A less charitable interpretation of wage stagnation is that it’s part of a much longer pattern of ownership feasting on labor’s productivity gains of the last 35 years or so. After all, U.S. worker productivity is up 65 percent since 1979, wages only 8 percent in real terms. Someone’s pocketing the difference.

In a related note, the following is a bit good bit of news regarding household economics: the Fed reports that the U.S. household debt service ratio – how much of a household’s income goes to paying debt, in other words – was very low in the third quarter of 2014 at 9.98 percent. A little less than half of that total goes to service mortgage debt, a little more than half to serve other kinds of debt. The figure’s important because it shows a rational reaction (among a very large number of people) to the reality of wage stagnation. Back just before the recession, the debt service ratio was more than 13 percent, much of that representing large mortgages that turned out to be unsustainably large. That much debt helped make a bad recession much worse.