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With the good news of the creation of 242,000 jobs in February, some are wondering why average hourly earnings declined. The answer is that the jobs created were in lower-paying sectors, in particular health care and social assistance (38,000 jobs); retail trade (55,000 jobs); and food services and drinking places (40,000). In contrast, the higher-paying jobs in manufacturing, financial activities, and professional and business services were practically unchanged.
The unemployment rate declined for those with less than a high school diploma, while remaining the same for those with higher levels of education. In addition, the average workweek declined by 0.2 hours to the lowest in two years. When more low-skill and low-paying jobs are added to the mix, and people on average work fewer hours, then average earnings decline. The economy needs more high-skill jobs in order to provide higher wages that fuel consumption. How to encourage the economy to create these high-skill jobs is the challenge for Congress and the administration.
Diana Furchtgott-Roth is a Senior Fellow and Director of Economics21 at Manhattan Institute