Unemployment fell in April to the lowest level since 2000, signaling the continued strength of the U.S. economy as the longer-than-expected recovery stretches on.
The U.S. unemployment rate fell to 3.9 percent last month, down from 4.1 percent in March, the Labor Department said Friday. Meanwhile, employers added a total 164,000 jobs over the month, bringing average monthly job growth to 208,000 this year so far.
The data released Friday shows the continued strength of the economic expansion, one of the longest in the country’s history. The economy has been adding jobs for 91 straight months and the unemployment rate has been inching consistently downward. Still, a smaller labor force and continually sluggish wage growth suggests some slack remains in the economy.
“With an unemployment rate like the one we’re having now, we would expect the wages to be higher,” said Cathy Barrera, chief economist at ZipRecruiter. “I was disappointed by today’s number, and hope it will climb.”
This ongoing conundrum—as economic growth continues but wages don’t rise at the rate expected—has persisted. In theory, when unemployment is this low, fatter paychecks should follow as employers have to pay more to attract scarce workers. Despite the expectation for wages to finally pick up, Friday’s data was no departure from the ongoing trend. Wages saw a 2.6 percent year-over-year rise in April, lower than wages have risen during past expansions.
“The wage data has been looking like it was improving the last couple months, but this report threw a little cold water on that,” said Jeremy Schwartz, economist at Credit Suisse.
While falling unemployment may stroke fears that the economy is overheating—potentially leading to growing inflation—subdued wage growth suggests these fears are not founded yet, and the economic recovery still has some way to go before reaching full employment.
Lower wages also suggest that, though the labor force shrank in April, high demand for workers has been met with a growing number of people who, seeing the ongoing strength of the economy, are making efforts to return to the workforce. A measure that tracks the number of workers who have given up looking for work, or are working part-time jobs when they’d like to be full time, was 7.8 percent in April, down from 8.6 percent the previous year.
“Over the past few years…there’s been an increase in the supply of labor, you’ve had people come in off the sidelines,” said Dan North, chief economist at Euler Hermes North America.
Indeed, historically low unemployment—which has only reached this level a handful of times in history—has benefitted populations previously left behind.
“Workers who had not been benefitting from the economy are starting to, workers who previously maybe struggled to find a job or hadn’t gotten the job they wanted,” Gimbel said.
Michael Murphy has worked with formerly incarcerated individuals at the Seattle-based non-profit Pioneer Human Services for the past six years, helping secure employment for people who have recently left prison or jail. The program currently works with around 60 different companies in the area, but he said it’s received heightened interest from employers in recent months who are desperate for workers.
“Right now, talent is so hard to find, so we’ve definitely seen an increased eagerness from employers the program works with,” he said.
For many companies, while sustained economic growth has improved business conditions, their growth is limited because they simply can’t find people to hire. As they adjust to an increasingly competitive hiring environment, some companies are rethinking what they need to attract and retain employees, as well as the types of workers—in the way of skillset and background—that they’re open to hiring.
For some prospective employees, this has meant a criminal background or a failed drug test doesn’t carry as much weight as it would have in the past, and that when they do land a job, it may come with more training than what was offered in prior years.
“Employers have all these job openings, but can’t find people to fill the jobs because they can’t find people that have the necessary skills so what they have been having to do, until recently, is hire people at an unskilled wage and then train them,” North said.
For Jenny Holton, president of the Atlanta-based construction firm Collins and Arnold Co., this has meant an increased commitment to training workers, and higher starting wages. Holton said many older, Baby Boomer workers have retired from construction jobs in recent years—which, compounded with the tight labor market, has worsened labor shortages in the industry.
Her company, she said, has made a particular effort to conduct training and recruit workers at high schools in the area, and has started paying those workers more than they would have in the past. While workers coming straight out of high school might have made minimum wage in past years—currently $7.25 in Georgia—these days, Holton said, companies are facing so much competition from each other that she’s start paying $10 or 12 an hour.
High demand for workers has also changed the company’s approach towards its employees, she said.
“Construction historically is kind of a mentally and physically tough industry and so there was a different mentality on how you trained people—weeding out the weak, so to speak,” she said. “Now you have to take a different approach in how you groom them once you get them here.”
The demographic shifts that Holton has seen can also offer some explanation for wage growth.
“You have a lot of older folks at the higher end of the income spectrum who are retiring, and they’re being replaced by younger people coming into the labor force who are at the lower end of the income spectrum,” said Ward McCarthy, chief economist at Jefferies.
While falling unemployment traditionally signals strength, the decrease this month may not be all good news, and the fact that the labor force shrunk in April contributed to the drop. This is because people who simply stopped looking for work aren’t counted in the traditional unemployment rate, even if they’d still like a job.
“Low unemployment is typically a good thing,” McCarthy said. “But if you’re also seeing people drop out of the labor force, it’s going down for the wrong reasons.”