If the job market's so good, why are workers still not getting a raise?

From most angles, the November jobs report that came out today was a good one, with 228,000 jobs added (221,000 in the private sector) and the unemployment rate staying at a low 4.1%. In that type of labor market, you'd think things would be great for workers, with labor markets being tight and workers still in demand, and it would lead to sizable wage increases. But that's not what we're seeing.

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.55. Over the year, average hourly earnings have risen by 64 cents, or 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory employees rose by 5 cents to $22.24 in November.

That’s a pay increase that’s barely above the rate of inflation, and lower than the 2.7% increase we had in November 2016, which allegedly led many frustrated blue-collar whites to vote for Donald Trump in hopes that their lives would get better. How’s that working out, guys?

In manufacturing, the job totals may be coming on strong (+31,000 in November, +189,000 over the last year), but the wages aren’t doing so hot, with average hourly earnings in manufacturing up by less than 1.9% since Nov 2016, and durable goods manufacturing wages only up by 1.7%. The pay in the “trade transportation and utilities” sector has also stagnated, with an hourly wage increase of only 1.6%.

Now maybe some of that is related to the new hires in these businesses, who may be making lower wages due to lack of experience. But other reports don’t seem to indicate that. I witnessed a similar trend of “big production, mediocre wages” in another BLS report from this week- this one on worker productivity.

While non-farm productivity per worker went up by 3.0%, overall nonfarm output revised up to 4.1% and hours worked went up to 1.1% from 0.8%, hourly compensation got revised DOWN from 3.5% to 2.7%. And the same pattern showed up for the 2nd Quarter, as worker compensation ended up lower than we knew.

Change in real and nominal hourly compensation
Nominal hourly compensation
Q3 2017 original +3.5%
Q3 2017 revised +2.7%

Q2 2017 original +1.8%
Q2 2017 revised+ 0.3%

And the compensation figures look even lamer when you adjust for inflation, showing that workers didn’t receive much for wages for the extra items they cranked out.

Real hourly compensation
Q3 2017 original +1.5%
Q3 2017 revised +0.7%

Q2 2017 original +2.1%
Q2 2017 revised +0.6%

If you stretch it out over the last 12 months, the picture is even worse for workers, as real hourly compensation has fallen on a year-over-year basis for 4 straight quarters, including a 1.1% decline in 3Q 2017.

12-month change, real hourly compensation
2016 Q4 -2.1/%
2017 Q1 -0.7%
2017 Q2 -1.1%
2017 Q3 -1.1%

That drop in real compensation is despite a 3% increase in output and a 1.5% increase in hours worked at the same time. That goes against the Marginal Revenue Productivity Theory of Wages. That theory says that if output and hours worked go up, then compensation should go up above inflation by that same amount.

Instead, real compensation is going DOWN, so where’s the money going? Right into the pockets of CEOs and stockholders, as we saw in the most recent GDP report.

Profits from current production (corporate profits with inventory valuation adjustment and capital consumption adjustment) increased $91.6 billion in the third quarter, compared with an increase of $14.4 billion in the second quarter.

And profits were up $114.8 billion on a 12-month basis (5.4%). Which begs the obvious question- if corporations are raking in increasing profits at the expense of workers under the current tax code, why wouldn’t we expect that inequality to get even worse when corporate rates are cut to encourage more profit-hoarding?

It shows yet again that what the majority of Americans need to break out of their economic stagnation isn’t more trickle-down tax cuts. Instead, THEY NEED A REAL PAY RAISE. And until we see a government that passes policies that encourage wages over profit-taking, the stagnation and crippling inequality will continue, along with the degradation of our quality of life.

And on top of the wage stagnation, we're not getting payback in any type of public goods, as corporations and their puppets in Congress are taking that as well. RFK nailed this fact nearly 50 years ago.