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% from a year earlier, matching the smallest gain since records began in 2007, the U.S. Labor Department reported last week. Payroll growth slowed to 96,000 last month, while the unemployment rate fell as more people left the labour 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.
A cooling global economy and 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.
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.
The average workweek for employees, which means extra pay when it lengthens, held at 34.4 hours in August after being revised down in July, last week’s report showed.
The Bloomberg Consumer Comfort Index hovered near an eight- month low in the week ended Sept. 2.
Costlier gasoline and groceries will take a bigger slice of American workers’ paychecks.
A gallon of regular fuel at the pump was $3.82 U.S. on Sept. 6, close to the highest since April, according to AAA, the biggest U.S. auto group. While driving to supermarkets is becoming more expensive, grocery prices may soon follow as the worst U.S. drought since the 1950s ravages crops.
The lack of progress on jobs and persistent unemployment is a "grave concern," Fed Chairman Ben S. Bernanke said Aug. 31 in a speech in Jackson Hole, Wyoming, as he made the case for additional monetary policy action.
Fed policy makers, who conclude a two-day meeting on Sept. 13, have discussed extending the period over which they’ll keep their target interest rate low and purchasing more assets to hold down borrowing costs.
Unemployment, which fell to 8.1% in August as 368,000 Americans dropped out of the labor force, has exceeded 8% since February 2009, the longest stretch in monthly records going back to 1948. At the same time, households are rebuilding savings and paring debt.
