The economy added 20,000 net new jobs in February, according to the Bureau of Labor Statistics, much lower than expected and much lower than we’ve seen over the past few years. Some of this slowdown may be due to unusually harsh weather in February, for example, depressing job growth in construction and restaurants and hotels. This report is a useful time to remember that one month’s data does not make a trend. The past three months averaged a gain of 186,000 jobs, likely a better reflection of underlying conditions.
At the same time, the unemployment rate ticked down to 3.8 percent, due in part to furloughed government workers returning to work. The overall labor force participation rate and employment-to-population ratio held steady in February, while the prime-age labor force participation rate fell slightly (by 0.1 percentage points) and the prime-age employment-to-population ratio was the same as January.
Wages grew 3.4 percent over the year, the highest so far in the economic recovery from the Great Recession. It appears that years of low unemployment hand-in-hand with employment growth and rising labor force participation are gradually forcing employers to raise wages to attract and retain workers. Importantly, while nominal wage growth is now closer to a level consistent with a healthy job market, it must remain at this level for a sustained period of time in order to restore labor’s share of income and before we can say we are at genuine full employment.
The latest wage figures are a promising sign, but it’s hardly mission accomplished. Indeed, the jobs report does not tell the whole story. We recently looked under the hood of wage trends throughout 2018 and, while wages are growing overall, inequality—between top earners and the middle, between black and white workers—continues to grow unabated.