Friday’s report from the Labor Department that the economy added 175,000 jobs in February was better than economists expected. After two very weak reports in December and January, expectations had been lowered for job creation in the month. While the overall number of jobs added was good news, details in the report give caution for future job growth. For the month, average weekly wages grew at their slowest pace in 5 years, suggesting no real future growth in the economy.
Average weekly earnings for production and non-supervisory employees actually fell in the month to $682.65 from just over $683 in January. For all employees, average weekly earnings inched up about 60 cents to $831.40. Those earnings are up just 1.3% since last February, the slowest annual growth since the recovery began in 2009.
Annual growth in average weekly earnings has been declining since 2010. In that year, average earnings grew 2.9%. Growth in the next three years dropped to 2.3%, 2.1% and 1.6% respectively. February’s increase in average wages was just 1.3% higher than the year before.
Part of the slowdown in wage growth is likely attributable to the drop in hours worked each week. In the past year, 17 of 19 industry sectors tracked by the Labor Department experienced a decline in the average number of hours worked each week.
With wage growth generally stagnant, it is hard to envision a pick-up in economic activity as we enter Spring. Consumer spending accounts for around three-quarters of economic activity. With wages growing slower than consumer inflation, it is hard to see a sharp uptick in consumer spending.