U.S. Unemployment Levels Crater, But Income Growth, Demand Remain Elusive

Unemployment levels have fallen to less than 7% in all 50 states, but demand for goods and services remains weak as incomes refuse to grow.

A new report by the Bureau of Labor Statistics found that unemployment fell in 28 states from December to January 2016, while non-farm payroll employment rose in 30 states and Washington D.C. The improvements helped the U.S. headline unemployment rate, which fell 0.8% from a year ago to 4.9%.

Unemployment levels have fallen to less than 7% in all 50 states, but demand for goods and services remains weak as incomes refuse to grow.

A new report by the Bureau of Labor Statistics found that unemployment fell in 28 states from December to January 2016, while non-farm payroll employment rose in 30 states and Washington D.C. The improvements helped the U.S. headline unemployment rate, which fell 0.8% from a year ago to 4.9%.

The biggest employment increases were in Florida, Texas, and North Carolina, while the biggest declines in employment were found in Pennsylvania, New Jersey, and South Carolina.

Washington D.C., Vermont, and Nevada saw the biggest declines in unemployment rates, helping the broader unemployment rate to continue its steady weakening trend that has been seen since 2012.

Only Wyoming saw an increase in unemployment rates, while all other states saw unemployment rates flat or down. The lowest unemployment rate, in North Dakota, was 2.8%, closely followed by New Hampshire, Nebraska, and Hawaii.

Flat Incomes

The strong gains in employment have been a continual process throughout 2014 and 2015, but this trend has not translated into wage gains.

In fact, the gap between large and small income earners has continued to grow in a trend that spans four decades. A recent study by the Economic Policy Institute, a think tank, found that America has seen surging productivity gains per worker but worker compensation has lagged that gain significantly. As a result, “an American earning around $50,000 today would instead be making close to $75,000” if wages had risen in-line with productivity growth, according to the report.

Additionally, nominal wage growth in 2015 showed “no evidence of substantial acceleration,” indicating that the Federal Reserve should see no sign of “incipient inflation and raise interest rates in an effort to slow the economy.”

This decline in real wages, combined with higher rents, housing prices, tuition costs, and health care premiums, has resulted in a struggle in several markets, including the stock market. A new study by Bloomberg found that, in the last three years, retail investors have been net sellers of U.S. stocks, while corporations have been net buyers. Bloomberg said this trend is “without precedent” and is “another sign of how crucial buybacks are in propping up the bull market as it enters its eighth year.”

With less demand from average Americans for stocks and real estate, some analysts have cautioned that these assets could not continue to appreciate forever, and a major decline in both stocks and housing prices could be an effect of the declining real wage growth of America’s middle class.