U.S. Unemployment Dips Below 4 Percent For The First Time In More Than 17 Years

May 4, 2018
Originally published on May 4, 2018 4:44 pm
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Here's a line that hasn't been said in 17 years. The unemployment rate was 3.9 percent last month. Yep, the lowest rate since the year 2000. What's more, April was the 91st straight month of job gains. But that hasn't brought along big pay raises. NPR's John Ydstie is here to tell us why. Welcome to the studio.

JOHN YDSTIE, BYLINE: Hey, Audie.

CORNISH: So employers say they can't find enough workers now, right? And then economists say that when that sort of thing happens, usually, wages are supposed to go up. So what is going on? What's the disconnect.

YDSTIE: That's a good question. Many companies now are so desperate for workers that they're actually recruiting teenagers, or they're giving former inmates a chance and even overlooking marijuana use to find the people they need. But the April data showed that wages rose just 2.6 percent in the past year. And that's about the same slow rate we've been seeing over the past several years. Now, 17 years ago, the last time unemployment was at this very low level, wages were rising between 3 and 4 percent a year.

CORNISH: So what's different this time around?

YDSTIE: Well, I talked to an economist named Andrew Chamberlain about this today. He works at the online job site Glassdoor. And this is the first thing he told me.

ANDREW CHAMBERLAIN: Today, you have high-earning baby boomers leaving the labor force, and they are being replaced by young workers at the beginning of their career earning their lowest pay of their career. So that composition is pulling down wage gains.

CORNISH: So he's saying, essentially, all of these older workers leaving their jobs - they're taking those, like, high salaries with them. And younger, cheaper workers are coming in. Is that the story?

YDSTIE: Right. Right. And there are other factors. Lots of employers are offering bonuses now rather than increases in base pay. And those bonuses don't show up in the hourly wage data we get in this monthly employment report. And some other forms of compensation don't show up in the hourly wages, either, like health benefits or retirement contributions, maybe a life insurance that your company helps you pay for. Many employers are offering those things instead of wage increases. And, in fact, some of those broader measures of total compensation have been rising faster than hourly wages.

CORNISH: Of course, it's worth noting here that we've been talking in averages. But when you look at individual sectors, John, what patterns do you see when it comes to pay?

YDSTIE: Well, some high-tech jobs are seeing much greater wage gains than the average 2 1/2 percent a year - and many jobs in health care, too. But obviously, some job categories have to be doing worse than the average. And certain professional jobs are being affected by automation and the Web, including insurance agents. People are buying insurance on the Web now.

CORNISH: It's interesting, John - you probably could've said the same thing about travel agents at one time, right?

YDSTIE: Right.

CORNISH: So should we expect this trend of slower wage growth to continue even if the unemployment rate somehow continues to fall?

YDSTIE: You know, Audie, virtually all economists at the Fed and in the private sector say, eventually, we'll see wages rise faster as the unemployment rate drops. And it's difficult for them to imagine a world where that doesn't happen. I guess we'll just see.

CORNISH: That's NPR's John Ydstie. John, thank you.

YDSTIE: You're welcome. Transcript provided by NPR, Copyright NPR.