State of the Labor Market

September 2019 Jobs Day Preview: Growth in the Average Worker’s Paycheck Is Slowing Down

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Wage growth may be steady, but growth in average weekly earnings is slowing due to a decline in average hours worked.

Hourly wage growth is a widely-watched measure of the state of the labor market, and rightly so. Faster wage growth signals a tighter labor market, in which employers are competing for workers. Yet the amount of money in a worker’s paycheck depends not only on their hourly rate, but the number of hours they work, as well. 

Growth in average weekly earnings has slowed in recent months, despite hourly wage growth roughly holding constant, because average weekly hours have been stagnant or falling for most of this year. Thanks to growing hourly wages, average weekly pay is still growing compared to a year ago, but the 2.9% growth in August is down a fair bit from the peak of 3.6% growth in October 2018.

Earnings growth may be declining, but it’s still at a level higher than it saw during most of this expansion. That said, a slowdown in earnings could put a crimp on personal consumption growth, which has helped boost GDP growth of late. 

Elsewhere in the September jobs report, I’ll be looking to see:

  • If employment growth in the private sector continues to fall, further signaling a slowing labor market;
  • Whether the employment rate for prime-age workers retains its large gain from August;
  • If hourly wage growth starts to pick up after the past six months of stagnation.
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