Wages are stagnating as the job market cools, restraining the consumer spending that is needed to sustain the U.S. economic recovery.
Average hourly earnings were little changed in August from the prior month and up 1.7 percent from a year earlier, matching the smallest gain since records began in 2007, the Labor Department reported last week. Payroll growth slowed to 96,000 last month, while the unemployment rate fell as more people left the labor force.
Limited employment and wage prospects together with the highest gasoline prices in four months are straining household budgets after the weakest quarter for spending in a year. With little else to spur the expansion, Federal Reserve policy makers meeting this week are set to consider further easing to shore up the world’s largest economy.
“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 a Sept. 7 interview on Bloomberg Radio’s “Surveillance” with Tom Keene. “With a weak labor market -- and we have had a very weak labor market for four years -- there is not a lot of prospect for a turnaround in that.”
The so-called fiscal cliff of U.S. tax increases and government spending cuts that take effect at the end of 2012 unless Congress acts represent hurdles for companies considering whether to take on more staff.
A looming recession in the Eurozone and a slowdown in China also pose barriers as they curb demand for U.S. exports. The Standard & Poor’s 500 Index was little changed at 1,438.05 at 10:31 a.m. in New York as concern over Greece’s debt crisis overshadowed speculation central banks will take action to spur the economy.
In China, imports unexpectedly fell and industrial output rose the least in three years, signaling more stimulus may be needed. Inbound shipments slid 2.6 percent in August from a year earlier as exports rose 2.7 percent, the customs bureau said in Beijing today. Production increased 8.9 percent, the National Bureau of Statistics said yesterday.
French business confidence climbed for the first time this year last month and factory output unexpectedly increased in July, suggesting the euro region’s second-largest economy may regain some strength.
In the U.S., the economic outlook is “about as uncertain as we have seen it in a while,” Michael DeWalt, director of investor relations at Caterpillar Inc., said last week at an industrials and materials conference in Boston.