The US Jobs Market is Missing Its Middle

May 9, 2016
Why are so many people unhappy about a U.S. economy that has generated more than 12 million jobs over the past five years? One explanation: A lot of those jobs don't pay very well.

The latest U.S. employment report illustrates a persistent contrast between the labor market and the broader economy.

Non-farm employers added an estimated 160,000 jobs in April—less than forecasters expected, but still more than enough to compensate for natural growth in the labor force.

The unemployment rate has remained at a low 5% (or even lower) for seven months straight.

Yet this apparently ample demand for workers hasn't generated the wage growth needed to drive consumer spending higher.

The average hourly wage was up 2.5% from a year earlier, a bit better than in previous months but still nearly a percentage point short of the pace that prevailed before the recession.

Why the disconnect?

One possibility is that the mix of jobs being created has been skewed toward low-paying types of work. This could hold average wage growth down even amid strong overall employment gains and decent raises in individual sectors.

To get a sense of whether this has been happening, I split the total number of private-sector jobs into three wage groups -- high, medium and low, currently paying an average of about $16, $24 and $35 an hour, respectively. I then tracked each group's cumulative job losses and gains through the recession and recovery. 

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