Workers in U.S. Face Stagnant Incomes and Cooling Job Prospects

Photograph by Victor J. Blue/Bloomberg

Shoppers at a Costco Wholesale Corp. warehouse in New York.

As if the sluggish job market weren’t bad enough, Americans have one more thing to worry about: stagnant wages.

Average hourly earnings barely budged in August compared to July and rose just 1.7 percent from a year ago, matching the smallest gain since records began in 2007. Those figures came in last week’s Labor Department report, which showed employers added 96,000 workers to their payrolls in August, down from 141,000 in July.

“Real wages are going nowhere  something between nowhere and down — depending on what occupation you are in,” Alan Blinder, a Princeton University economist and former Fed vice chairman, said in an interview after the report.

The news is discouraging for consumers already coping with the highest gasoline prices in four months. Grocery bills may also start to rise as the worst drought in half a century ravages crops.

With unemployment clocking 8.1 percent in August, workers have little leverage to bargain for higher wages. Longer shifts, which mean extra pay, aren’t something workers can count on either, last week’s figures showed. The average workweek held at 34.4 hours in August after being revised down in July.

Businesses may remain cautious about hiring or adding shifts. Demand for their products is cooling overseas, and at home, tax increases and spending cuts will go into effect automatically at the end of the year unless Congress acts, threatening to pitch the economy into another recession.

All of this adds up to a drag on consumer purchases, which make up about 70 percent of the economy. Federal Reserve policy makers, meeting this week to consider whether further stimulus is needed to shore up growth, are bound to take note, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co.

“It leaves the economy in this place we’ve been at over much of the past three years, which is growing, but at a very disappointingly slow pace,” said New York-based Feroli, a former economist for the Fed. The latest data on jobs and wages “pretty strongly seals the deal for more action by the Fed.”

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