The unemployment rate fell to its lowest level in 17 years in April as the economy’s record-shattering streak of adding jobs continued. Significant wage growth, however, remains elusive.
The jobless rate crossed the 4 percent threshold and clocked in at 3.9, the lowest level since December 2000, the Labor Department said on Friday. Employers added 164,000 jobs in April, falling short of the economist estimates of 193,000. April marks 91 straight months that the economy has added jobs—a record.
Despite the solid numbers, wage gains remain a mystery. Average hourly earnings only increased by 2.6 percent from a year earlier. Last time the jobless rate was this low wages were increasing by 4.3 percent. Economists suggest that companies are finding creative ways to hire without raising wages, such as offering more attractive benefits and bonuses.
“I think we all think that 3.9 percent is pretty amazing,” said Martha Kimbel, director of economic research at the online job site Indeed. President Trump made mention of the figure, tweeting: “JUST OUT: 3.9% Unemployment. 4% Broken!” shortly after the report was released.
The dip in the unemployment number is partially due to a reduction in the labor force last month, but cracking the 4 percent mark is still significant. The previous rate of 4.1 percent held steady for six straight months and it’s only been lower a handful of times in the past 70 years.
The report also showed that employers continue to expand their payrolls. After a revision to the March number from the initial 103,000 jobs to 135,000, and a slight downward revision for February, the 3-month average comes out to 208,000 jobs added.
An alternative unemployment rate that includes discouraged or part-time workers who are looking for work also went down from 8 percent to 7.8, showing strong signs that the economy could very well be on its way to full employment.
But the economy isn’t quite there yet. Some workers, like Matt Fitzgerald, are still looking to make the leap from part-time work to a full-time employee. Fitzgerald was recently at a technology and engineering career fair, in Midtown, Manhattan. He currently works part-time at AutoZone selling car parts.
Fitzgerald learned how to repair helicopters when he was in the Marine Corps and wants to put his skills and security clearance to use by securing a full-time job as a mechanical engineer. “I feel good about it,” said Fitzgerald before he left the job fair. “To drop off the resume and speak to someone, shows more initiative than just applying online.”
The one sore spot of the report is the part that directly affects worker’s pockets: wage gains. “Wage gain had been looking like it was improving the past few months but this report threw a little bit of cold water on that,” said Jeremy Schwartz, an economist at Credit Suisse.
Economic theory dictates that as the labor market tightens, companies should raise wages to compete for scare workers. “That’s been a conundrum for a lot of economists,” said Dan North, chief economist at Euler Hermes North America. “We’re stuck now at 2.6% year-on-year where it’s been for 3 months.”
With wages not rising significantly, the Federal Reserve is unlikely to change its course of raising interest-rates two more times this year. If companies were to raise wages it would mean inflation could be around the corner, but for now, the Fed has no reason to worry. “I’m not seeing anything in this jobs report that is changing my mind about what the Fed is likely to do,” Kimbel from Indeed said.
How employers are able to add jobs without increasing wages to attract workers remains a bit of a mystery. Some anecdotal evidence points to companies offering employees additional benefits and bonuses instead of higher compensation, some economists said.
Some companies are looking to train employees rather than tempt workers who already have skills with higher wages, explains Chris Mier, chief strategist at Loop Capital Markets LLC. “They don’t want to raise the wage level of the new employee because that raises the level that they have to apply to existing employees,” he said.
Companies are also resorting to training programs because they can’t find enough workers who have the skills they’re looking for, North said.
Synechron, a consulting and technology firm based in New York, is one of those companies. The financial technology company faces challenges in recruiting workers who are fluent in coding programs such as Java and Python and have knowledge of the financial sector.
“It’s a bit difficult, since many developers may not know about mortgages and banks,” said Atul Tajave, the senior manager of market communications. As a result, the company holds four training sessions every year which last for six weeks. “We fly them out, pay for their accommodations, train them and offer them a job,” Tajave said. “If they have a keen interest to learn, we’ll take them.”