By Jeffry Bartash, MarketWatch
Andrew Burton / Getty Images
The numbers: The lowest unemployment rate in 50 years still isn’t leading to big increases in wages and benefits for American workers.
The closely followed employment cost index rose 0.7% in the fourth quarter, the Bureau of Labor Statistics said Friday. That matched the MarketWatch forecast.
Yet the increase in wages and benefits in 2019 slowed to a 2.7% pace from a post 2008 recession high of 2.9% in 2018. Other measures of pay and benefits also signal that the growth in compensation appears to have peaked.
“It’s a bit surprising that with sustained levels of historically low unemployment we haven’t seen wages moving up above [3%],” Federal Reserve Chairman Jerome Powell said a few days ago.
Wages and salaries have risen 2.9% in the past 12 months, down from 3.1% in 2018.
Similarly, the increase in benefits slowed to a 2.2% yearly rate from 2.8%. That’s the slowest pace in three years.
Some workers have made out better than others, however. Wages and benefits for blue-collar workers in goods-producing industries, for instance, have risen 3.4% in the past year, the largest gain in almost 20 years.
Many manufacturers have complained about a scarcity of skilled workers, suggesting they’ve boosted compensation in part to lure workers.
The ECI reflects how much companies, governments and nonprofit institutions pay employees in wages and benefits.
Big picture: With worker pay no longer growing faster, households probably won’t be able to spend much more than they already do.
The result could be slower consumer spending in 2020 — and a slower U.S. economy. Consumers have fueled most of the growth during a record expansion now in its 11th year.
The strong labor market and steady consumer spending, however, likely preclude the possibility of recession any time soon.
What they are saying? “Wage growth has not picked up despite a tightening of the labor market,” said Neil Dutta, head of economics at Renaissance Macroresearch.
Market reaction: The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.85% and S&P 500 /zigman2/quotes/210599714/realtime SPX +1.95% sank again in Friday trades. Stocks had been trading at records earlier in the month until the outbreak of the coronavirus in China.
The 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.25% slipped to 1.53%. Investors have sought the perceived safety of government bonds.