Poor wage growth, poor recovery

Job openings (JTS100JOL) compared to wage growth (AHETPI), 2000 to 2013

The chart above shows Total Private Job Openings (JTS1000JOL, black line, measured monthly in thousands and seasonally adjusted) compared to Total Private Average Hourly Earnings (AHETPI, % change from one year ago, measured monthly and seasonally adjusted). I’m comparing The Great Recession which ended in June 2009 to the Early 2000s Recession, which ended in November 2001.

Of course directly comparing two unique events such as recessions is difficult, it is interesting to look at changes in wages once the economy started to grow again, as it is indicative of the strength of the recovery. Looking at the Early 2000s Recession we see that wages grew sharply until Q1 2003 then fell until Q2 2004. From that point on wage growth strengthened as the economy continued to grow until the advent of the next recession. It took some 27 months after the nation emerged from recession for wage growth to hit a trough the rise again.

By comparison wage growth has declined for 42 months since The Great Recession ended, only now appearing to strengthen and move up. Employees clearly lack negotiating power and its not clear if this most recent upswing is sustainable; Q1 2010 and Q3 2011 also marked periods where wage growth appeared to strengthen.

So what happened to wages? The usual explanations can be trotted out: outsourcing and increased automation are generally raised, but everyone ignores what is the most likely explanation: America is producing an undereducated and underperforming workforce. Jobs are going elsewhere.

Comments are closed.