In Trump’s labor market, plenty of jobs, not enough wage growth

The US economy seems back on track after a brutal set of hurricanes—employers added 261,000 jobs in October and the unemployment rate edged down to 4.1%.

While markets had expected a whopping 310,000 new jobs to replace the ones temporarily lost because of the hurricanes, the news is still good: Unemployment is now at its lowest since 2000, and job creation has edged up in stronger fashion.

Still, the overall results are mixed. The labor force participation rate—which measures how many people are actively looking for jobs—fell. And the number of workers relative to the population as a whole also fell.

“Its important to note that this [the drop in the unemployment rate] happened for all the wrong reasons—the result of workers leaving the labor force, not finding jobs,” warns Elise Gould, of the left-leaning Economic Policy Institute.

What’s most concerning is that while jobs are plentiful, what people are actually getting paid has hardly grown.

Average hourly earnings for private workers have barely budged, growing just 2.4% in October from a year earlier. (This partially reflects the automatic fall in average wages from the previous month because of the return of workers in low-paid sectors temporarily kept from their jobs by hurricanes.) But in general, weak earnings growth has been a problem throughout Donald Trump’s presidency. For production and nonsupervisory private workers (i.e. non-managers) annual hourly wage growth adjusted for inflation was 0.1% in October.

Inflation-adjusted wage growth has also been lower during Trump’s term than in recent years. (To be fair, real wage growth at the start of Obama’s term was so high because inflation had virtually disappeared.)

The new numbers come as the Trump administration is pushing for a corporate-tax cut. Trump’s Council of Economic Advisors (CEA) believes that such a cut will boost annual earnings by $4,000 for the average American. The evidence suggests otherwise: Analysis from the Tax Policy Center finds that Trump’s tax cuts will benefit foreign investors more than the middle class. Moreover, the CEA’s proposal relies on disputed models of how tax cuts affect wages and far outpaces others’ forecasts. (Here’s a close look at what the CEA report gets wrong.)

Now, all eyes are on the Federal Reserve, and whether the Federal Open Market Committee will raise rates come December. Despite dismal wage growth for the average American, traders still believe a rate hike is imminent: Fed funds futures, after this morning (Nov. 3), still indicate a 90% chance of a December raise.

“Flat wages doesn’t concern us too much,” said Sean Lynch, co-ahead of global equity strategy at the Wells Fargo Investment Institute. “We do think wage pressure could start to weigh on the markets next year in a tight labor market.”