US job numbers and wage growth are up – but inequality is also on the rise

It’s been a long, slow recovery for US workers but wages finally appear to be growing again, according to the latest jobs report released on Friday. But behind the headline rate the figures show – once more – that inequality is on the rise.

On Friday the labor department released its latest monthly jobs update. The US added 200,000 new positions in January, higher than expected, but the real surprise was in wage growth. Hourly earnings rose 0.3% in January, enough to lift the annual rate up to 2.9%.

“This may be the start of a welcome trend in wage gains, and marks the highest percentage increase in average hourly earnings since 2009,” said US secretary of labour Alexander Acosta.

A tightening labour market and unemployment at 4.1% (a 17-year low) appears finally to be making its way into people’s pockets as employers are forced to raise wages in order to attract talent.

But the big numbers hide an ominous trend. For many Americans, slow wage growth isn’t just a hangover of the post-2008 “great recession”. For those without a college degree the sluggish rate of growth can be traced back to the 1970s, and the more recent slump deepened that inequality.

The latest jobs figures show that wages for “production non-supervisory” positions – the bottom 83% of the jobs market – grew at 2.4%. Elise Gould, senior economist at the Economic Policy Institute, said that suggested gains for those in more senior positions were far greater than the 2.9% headline rate.

“The top 17% seems to be pulling away and it looks to me that that distance is a little problematic,” she said.

Gould is currently analyzing the wages data, but her 2016 study found average wages of workers with a college degree (at $31.87 an hour) were nearly twice that of those with a high school degree only ($17.14 an hour).

Slow wage growth has been held back in part by the decline of unions in the US and also by the still large pool of people who have dropped out of the workforce.

The labour force participation rate – which measures the percentage of the US population in jobs or actively looking for work – is bafflingly stuck at 62.7% despite seven years of strong jobs growth. It was 67.3% in 2000.

With so many people still sitting it out on the sidelines, employers maintain the upper hand, and low-wage workers, in particular, continue to count the cost.