Wall Street Journal (06/03/15) Ben Leubsdorf; Jon Hilsenrath
With the unemployment rate decreasing to precrisis levels across the country, more American workers are wondering why their wages are not increasing—and economists and policy makers at the U.S. Federal Reserve also are questioning the slow pace of wage growth. When unemployment rates decline, wages generally increase as demand for workers rises, but an analysis of U.S. Department of Labor data by the Wall Street Journal shows that 67% of 33 U.S. metro areas where unemployment rates and nonfarm payrolls returned to prerecession levels last year recorded slower wage growth than the prerecession pace.
This is because of such factors as overseas competition, hidden slack in the economy, lingering psychological impacts of the recession, and scant growth in productivity. DOL says wages and salaries posted a year-to-year increase of 2.6% in the first quarter, the biggest gain since 2008, but John Williams, president of the Federal Reserve Bank of San Francisco, notes that even at full employment, yearly wage increases of 4% or more that were common before the recession would be replaced by increases of 3% to 3.5%.