The U.S. economy is now a decade on from the start of the global financial crisis and at what most economists view as full employment, yet when it comes to wage rises, the answer seems to be forget about it.
Government data on Friday showed that average hourly earnings in June rose just 2.5 percent on the year and have slowed in the past two quarters rather than accelerating even as workers become scarce due to continued economic strength.
For decades, higher wages had been driven by gains in worker productivity, but there are few signs now of an investment boom or of innovations fundamentally changing the way work is done. Productivity growth in the U.S. has averaged just one percent since 2005, half the level of 1990-2004; in the past five years the annual growth rate has been a dismal 0.5 percent.
While most economists say the jobs numbers alone are enough to keep the Federal Reserve on a path to hike rates again this year, the slow wages growth implies limits to how high the Fed can push rates and raises questions about the longer-term health of the U.S. economy, which depends on consumer spending for 70 percent of its activity.
Reference: Reuters
Read More: http://www.reuters.com/
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