October brought the second straight topsy-turvy jobs report in a row. After gaining just 18,000 jobs in the month of September, the economy roared back, adding a total of 261,000 jobs in October. When revisions are taken into account, the growth in jobs was enough to put the economy back on pace of growth of 169,0000 jobs per month, which is similar to the past year. Manufacturing growth already came back, adding 24,000 jobs—factories have added 138,000 jobs in 2017.
While the unemployment rate again turned downward to 4.1 percent (the lowest since December 2000), the overall household data made an expected correction after a gangbuster report in September. After reaching its highest level since September 2014, labor force participation dropped from 63.1 to 62.7 percent in October. With the labor force aging, the employment rate of prime-age workers is the best way to compare apples to apples when comparing participation now and in the past. That number dropped to 78.8 percent in October but has risen by 0.6 percentage points over the past year—getting closer to the 80-percent plus level that would indicate a complete recovery. In another positive note, the number of workers engaged in involuntary part-time employment has dropped from 5.85 million to 4.75 million since last October, after peaking above 9 million in late 2011. This brings the so-called “real” unemployment rate (U-6), which includes discouraged workers and the involuntary part-time, to 7.9 percent, its lowest level since December 2006.
Average hourly earnings have grown by just 2.4 percent over the past year, still failing to reach the 3–4 percent needed for workers to start really feeling the effects of pay raises that outpace inflation.
Wage growth reported in September was also hurricane-tinged, and October’s data showed another disappointing correction. With new data released today, average hourly earnings have grown by just 2.4 percent over the past year, still failing to reach the 3–4 percent needed for workers to start really feeling the effects of pay raises that outpace inflation.
Despite the disappointing data on average wages this month, low unemployment rates and worker shortages in front-line occupations have provided certain workers an edge in bargaining for higher wages, especially those workers at lower education and wage levels. Economists like Dean Baker have drawn the connection, citing improvements in wages for workers with only high school degrees. Women with only high school degrees have earned median hourly wages that outpace inflation by 2.6 percentage points, and men by 3 percentage points. Relatively disadvantaged groups have been the major beneficiaries of recent declines in unemployment, whereas gains for whites—and especially college-educated whites—were limited (in part because they were the first ones to benefit from the recovery).
Gains for Hispanic Workers
Since September 15–October 15 was Hispanic Heritage Month, today we explore the connection between a tighter labor market and increasing wages, with a spotlight on Hispanic workers: a group which accounts for approximately 17 percent of the nation’s workforce.
In October, Hispanic workers in America experienced a 0.3 percentage-point change in unemployment, down from 5.1 percent in September to 4.8 percent this month, and down from a two-year high of 6.4 percent last September. Median weekly earnings of Hispanic workers have been growing steadily and outpacing other demographic groups since Q1 2016.
A majority of workers of Hispanic descent are from Mexico, followed by Puerto Rico, El Salvador, and Cuba. Net migration from these countries has stabilized in the past few years, a trend accelerated by fears of anti-immigrant backlash since the 2016 election, especially as less workers are coming to the U.S. from Mexico, and more are leaving. This shift has contributed to a tightening in areas of the labor market that are comprised of more hispanic workers. In particular, in construction, agriculture, and hospitality sectors, there are signs that tighter labor supply—or a combination of less people looking for work and more employers looking for workers—bolsters worker bargaining power. In big cities, restaurants are largely dependent on Hispanic immigrants (and to a lesser extent those from other parts of the world). Also, farm owners have reported having trouble finding farm workers, and there is a national shortage of construction workers. We see in Figure 1 that, in terms of median weekly earnings, Hispanic workers are benefiting more from this recent tightening of the labor market.
The demand for workers in these occupations has kept Hispanics, especially Hispanic men, in the labor force at higher rates than whites or blacks. A higher percentage of Hispanic males participate in the labor force than any other demographic group, and the percentage has grown since the second quarter of 2017. Between July and September 2017, the labor force participation rate of white workers has increased by 0.2 percentage points, whereas Hispanic workers’ participation has jumped 0.7 percentage points, an addition of nearly 1 million workers. Hispanic workers tend to be more mobile and willing to move to geographic areas with more opportunities for work, which could explain both their ability to find higher wages and their higher participation in the workforce (as opposed to dropping out if there aren’t ample opportunities).
However, despite recent gains, we unfortunately can’t treat this as a victory. Growth in weekly earnings may simply indicate that workers are working more hours in a week, rather than earning higher hourly wages. And despite higher growth in wages as of late, there is still a significant wealth and income gap between minority-group and white workers. There are about 27 million Hispanics in the labor force, but nearly 11 million of those workers earn poverty-level wages; around 20 percent of Hispanic people live in poverty; they continue to face discrimination in hiring and in the workplace; and they are more likely to experience poverty at older ages due to lifetime disparities.
We need to be clear about the consensus on immigration among economists: immigration is good for the economy.
There are policy tools that could be used to help ensure that these trends translate to improved quality of life for Hispanic workers and their families. Broad investment in infrastructure would help stimulate construction jobs across the country, not only in areas with low unemployment. Stricter enforcement of labor standards (regardless of immigration status) and anti-discrimination laws, as well as increasing the minimum wage, would disproportionately improve conditions for those at the bottom of the pay grade. Finally, we need to be clear about the consensus on immigration among economists: immigration is good for the economy. It stimulates innovation, provides fiscal support for the retirement system, and in many sectors supplies the workers for jobs that, despite increasing wages, are often seen as undesirable or geographically unreachable by native-born workers.