Pay continues to lag despite jobs growth

If market were fully recovered, wage growth would be about 3.5 percent, economist says

Although the economy added an impressive number of new jobs in April, Americans are still waiting to get raises.

And it looks like that wait will continue.

Despite the unemployment rate improving significantly to 6.3 percent from 6.7 percent, earnings still aren't growing much.

If the job market were fully recovered, wage growth would be about 3.5 percent, according to Bank of America Merrill Lynch economist Michelle Meyer. Instead, the annual growth rate in wages is just 1.9 percent.

In other words, while there is a job recovery, it looks like a "wageless" jobs recovery.

"We have not reached the point that workers have negotiating power," Meyer said.

That fact dampened enthusiasm for Friday's employment report despite the impressive creation of 288,000 jobs in April. If the economy were bringing a lot of people back to work, you'd assume employers would be finding it tougher to find people to hire and would be raising pay to keep people on the job or attract them from other jobs.

But that's still not the case, probably because there are still plenty of people who would like jobs but can't find them.

According to one measure of unemployment, known as the U-6, 12.3 percent of Americans still want better full-time jobs but have settled for part-time work to bring in some income. That has improved from the 17.2 percent high in 2009, but it still leaves a lot of people underemployed.

Also, it appears that a sizable number of Americans may be discouraged. They aren't trying to look for jobs even though they are in their prime working years. That is measured by what the government calls the "participation rate." In April, the rate of adults participating in the labor force plunged to 62.8 percent, the lowest level since 1978.

Some economists have suggested that participation should not be a great concern because Americans are simply aging and are retiring. But Meyer noted that the decline in participation centered on younger people 16 to 24 years old and prime-age workers age 25 to 54, who typically would be contributing to the nation's economy through work.

Twitter @gailmarksjarvis

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