Economic Indicators

News from EPI Wages rise in January, after 19 states raise the minimum wage: Shutdown complicates employment picture

The January employment report surprised with another large gain, although the government shutdown makes it harder than usual to make sense of this morning’s data. The unemployment rate ticked slightly higher to 4.0 percent, potentially because furloughed government workers and contractors were counted as jobless in the household survey. The number of people working part-time who wanted a full-time job (part-time for economic reasons) increased significantly in January, also likely due to the shutdown. While changes in the household survey’s population controls make it difficult to compare January 2019 to December 2018—because prior months’ data are not updated accordingly—this had no effect on the unemployment rate. Similarly, the slight increases (+0.1 percent) in the labor force participation rate and the employment-to-population ratio were unaffected by the new population controls.

Meanwhile, the establishment survey—which underpins the monthly payroll data and treated furloughed workers as employed—showed 304,000 jobs were added in January, just a bit stronger than the average of the last three months (232,000). Notably, last month’s unusually large gain in net jobs was revised down by 90,000, bringing December’s net job growth to 222,000, almost precisely in line with the newly benchmarked overall 2018 average (223,000).

Nominal wage growth in the private sector rose 3.2 percent over the year. Production/nonsupervisory earnings rose at a faster clip, 3.4 percent over the year, potentially reflecting the boost to workers’ paychecks from the 19 state minimum wage increases that took effect on January 1. While the overall message from the latest numbers is promising, the U.S. economy still needs stronger and more sustained wage growth to make up for the entrenched stagnation that followed the Great Recession. Wages should be allowed to climb higher for an extended period to claw back some of labor’s share of income.

See more work by Elise Gould