WASHINGTON — With U.S. unemployment at a 17-year low and businesses complaining that they can’t fill jobs, you might expect pay to be rising sharply as companies try to attract or keep workers.
It’s not. The October jobs report showed that pay gains remain sluggish, and the explanations include weak worker productivity and a still-low proportion of adults with jobs. These are long-running trends that still bedevil the economy despite its steady improvement.
Employers added a solid 261,000 jobs last month, the government said Friday, in part because many businesses in Texas and Florida re-opened after having been forced to shut down in September when Hurricanes Harvey and Irma struck.
The unemployment rate reached 4.1 percent, the lowest level in nearly 17 years, from 4.2 percent in September. But the rate dropped for a less-than-encouraging reason: Many people stopped looking for work and so were no longer counted as unemployed.
Still, Friday’s data showed that the hurricanes, for all their fury, hardly knocked the economy or the job market off course. Over the past three months, job growth has averaged 162,000 — similar to the pace of hiring before the storms.
Normally, with the unemployment rate ultra-low, businesses are forced to raise pay significantly to fill jobs or to retain existing employees. The last time the jobless rate was this low, in 2000, average hourly pay was surging at a 4 percent annual pace.
Then was then. In October, by contrast, wages crept up just 2.4 percent from a year earlier, the government said Friday. Though that’s double the pace of five years ago, it’s nearly a half-point less than the year-over-year rate in September.
Another factor affecting wage growth: Price increases throughout the economy are weak. Inflation rose just 2.2 percent in September from a year ago and would have been lower without a spike in gas prices.
One way out of the conundrum would be to raise worker efficiency. When workers become more productive — when their output per hour rises — companies can afford to pay more without raising prices.
Yet productivity growth has been weak since the recession ended in 2009. It grew just 1.2 percent a year, on average, in the past decade. That’s less than half the growth rate before the recession. One reason productivity has been so sluggish is that companies haven’t invested much in machinery, technology and other equipment that could boost workers’ output.
The Trump administration and Republican Congress are pushing a steep cut in the corporate tax rate from 35 percent to 20 percent in hopes of encouraging more productivity-boosting investment. But some economists argue that the increased profits stemming from the tax cut will be used mainly to boost dividends and share buybacks.
Jed Kolko, chief economist at Indeed, the job listing website, notes that the proportion of adults with jobs remains below pre-recession levels. That raises the possibility that there are more Americans available to work than the unemployment rate suggests. It also means that if employers can hire them, they may not feel pressure to raise pay.
Last month, 78.8 percent of adults ages 25 through 54 had jobs. That figure has risen 1.5 percentage points in the past two years. Yet it topped 81 percent in 2000, the last time unemployment was this low.
“By that measure, the labor market is not unusually tight,” Kolko said.