With the unemployment rate at its lowest level in nearly 50 years, American workers are finally starting to see their paychecks grow a little faster.
Weekly wages rose at an annualized rate of 3.3% in the third quarter, the Labor Department announced Tuesday, which beats the 2.6% increase in inflation over the same period.
That’s an improvement from the 2% increase in wages in the second quarter, which wasn’t enough to make up for inflation.
The weekly earnings measure is based on a survey that asks full-time wage and salary workers how much they usually make in a week.
Wages have been the missing piece of America’s economic recovery, with flat or very slow growth depending on which measure is used. Even the White House Council of Economic Advisers only found a 1.4% increase over the past year using adjustments that take into account benefits and changes in the workforce that make wage growth look higher.
Former Federal Reserve Chair Janet Yellen explained at a mortgage bankers’ conference in Washington on Monday why wages haven’t been rising as fast as as the dropping unemployment rate would suggest they should.
“Firms have more market power than they used to, and are resisting wage increases because productivity gains are not very robust,” Yellen said. “And labor’s bargaining power seems not to be great enough to push wages up at a faster pace.”
Rather than giving out pay raises, which are difficult to take back if the economy weakens, employers have been giving out non-cash perks like paid sick leave and better healthcare. But at a certain point, as people are left on the sidelines of the labor market, employers actually need to jack up salaries in order to attract or keep workers. Amazon’s new $15 minimum wage, which kicks in Nov. 1, was seen as a sign that workers can now be pickier about the jobs they take.
The number of job openings reached an all-time high of nearly 7.1 million in August, the Labor Department also reported on Tuesday. That keeps the number of unemployed workers per job opening at 0.9, which is as low as it’s ever been.
The number of layoffs, however, edged up by 176,000 to 1.8 million in August.
President Donald Trump was quick to celebrate the numbers shortly after they were released, tweeting: “Incredible number just out, 7,036,000 job openings. Astonishing - it’s all working!”