December’s jobs report, commonly referred to as the Employment Situation Report, showed that the U.S. economy still isn’t slowing down. The unemployment rate declined to 5.6 percent and the total number of unemployed persons dropped to 8.7 million, according to the Bureau of Labor Statistics.
Even the U.S. oil industry saw increased job growth as oil prices plummetted last month
The December employment numbers are just the latest signs of economic growth, on the heels of a number of positive economic indicators over the course of 2014. The BLS also revised November’s already impressive report, adding upwards of 353,000 jobs (the number was originally 321,000).
This chart shows the decline in the jobless rate over the past two years:
Source: Bureau of Labor Statistics
Why You Still Haven’t Gotten A Raise
Despite serious signs of improvement, the unemployment rate is now nearing (or has reached, depending on which economist you ask) a generally accepted level of stability. This means that soon, we’ll reach an unemployment rate that economists believe is as low as it can go without triggering an increase in inflation.
However, along with the good news comes the bad: average wages, which saw an increase in December, dropped 0.2 percent in December. Even worse, last month’s wage increase of 0.4 percent, which was heralded as good news, was revised downward.
Most economists agree that as unemployment continues to fall, employers will eventually be pressured to raise wages. After all, as more and more jobs open up, it becomes easier for workers to leave their jobs for higher paying ones. However, over the course of last year, the increase in workers’ wages barely outpaced the rate of inflation. That means that the purchasing power of the average worker did not increase at all.
The below chart illustrates this phenomenon:
Source: The Upshot
No One’s Looking For A Job
Okay, maybe not “no one.” Nevertheless, policymakers and economists are concerned that, despite rising employment numbers, fewer Americans than ever are participating in the labor force. Last month, 273,000 people dropped out of the labor market, meaning they were neither working nor looking for a new job. This reflects a larger trend since 2008:
Source: Bureau of Labor Statistics
Some of that change is likely due to the fact that more and more Baby Boomers are aging into retirement. However, with wages continuing to stagnate (meaning employers are less likely to give out raises), it’s no surprise that more and more people are choosing to stay at home instead of working for a paycheck that will buy them less and less.
What Does This Mean For Me?
It could mean a few things:
If you’re already employed, you probably either didn’t get a raise this year or got less money than you had hoped. The good news is that, if unemployment keeps falling, your boss will probably be more likely to give you a raise in 2015.
If you’re looking for a job, you’re probably in better shape than you would have been at this time last year. Employment is improving across the labor force, even for jobs in the oil and gas industry.
If you’re still in school, things are looking up for you as you near graduation. The Federal Reserve is unlikely to make a move in a direction that will drastically cut employment numbers, and the economy isn’t showing any major signs of slowing down.
For more information, check out Bloomberg’s coverage of the Unemployment announcement. You can also find the original Bureau of Labor Statistics report here.