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In France, the unemployment rate is falling at a snail’s pace and wage growth remains lackluster.
In France, the unemployment rate is falling at a snail’s pace and wage growth remains lackluster.

Global Job Situation Improves But Wage Gains Stay Soft

Subdued wage growth underscores why heads of the world’s largest central banks have clung to go-slow approaches to monetary policy adjustments

Global Job Situation Improves But Wage Gains Stay Soft

While many workers of the world are rallying around the strongest labor market in at least a decade, lackluster pay growth is keeping their enthusiasm in check.
Jobless rates have been falling across the Group of Seven industrialized economies and are projected to ease further this year, albeit modestly, according to the Geneva-based International Labor Organization’s flagship worldwide employment and social outlook, released Jan. 22. Unemployment rates in emerging-market nations, meanwhile, are on the cusp of a turnaround after years of weak commodity prices, Bloomberg reported.
“Developed countries are expected to enter their sixth consecutive year of decreasing unemployment rates,” ILO researchers wrote. “Yet many countries continue to report high rates of labor underutilization, with large shares of discouraged workers and growing incidence of involuntary part-time employment.”
Subdued wage growth underscores why heads of the world’s largest central banks have clung to go-slow approaches to monetary policy adjustments. However, the next year or two may mark a turning point for wages as global growth firms and business investment picks up.

North America
North America is a prime example of workers with jobs that aren’t yet a ticket to sizable pay increases. The rise of involuntary part-time employment in the US and Canada has also been combined with increased temporary contract work that can act as a brake on wage growth, the ILO said.
In the world’s largest economy, the jobless rate was at an almost 17-year low in December and probably stayed there in January as employers added 180,000 workers to payrolls, according to economists’ projections ahead of the US Labor Department data due Friday.
At the same time, as a share of the labor force, the number of employees working part-time but wanting full-time hours is declining more gradually. At about 3%, it’s at the same level as it was when the Great Recession started in December 2007.
That partly explains why Americans’ wages are improving at a slower pace than would typically be the case with a labor market that’s added two million workers a year for the last seven years. After factoring in even modest inflation, hourly earnings haven’t exceeded 1% gains on a year-over-year basis since October 2016. That’s allowing the Federal Reserve to take its time in raising interest rates even as the job market tightens and the economy strengthens.
Modest wage growth is part and parcel of Canadian monetary policy. Officials at the Bank of Canada, the first G-7 central bank to raise rates in 2018, said Jan. 17 they will be cautious about further tightening, partly because wages remain sluggish. Hourly pay gains averaged 1.7% last year even as unemployment dropped to an all-time low. Inflation has yet to exceed the top of the bank’s 1%-to-3% target range.

Europe
The leading European economies, meanwhile, have been picking up smartly and encouraging more hiring. In Germany, the jobless rate—using an EU-harmonized measure—stood at a 3.6% in November, the lowest in data going back to 1991. The number of unemployed declined 13,000 during the month, the 38th consecutive drop.
In the UK, the jobless rate held at a 42-year low of 4.3% in the three months through November, while the number of employed unexpectedly climbed to a record. So-called regular pay gains, unadjusted for changes in inflation, were up 2.4% in the same period, the highest in almost a year. But factor in changing prices, and worker pay remains subdued. The amount of slack in the labor market is central to the debate at the Bank of England.
Across the English Channel in France, the unemployment rate (9.2%) is falling at a snail’s pace and wage growth remains lackluster. Buoyant economic growth and government measures to modernize the labor market are giving rise to the prospects that job growth will pick up.
The job market in the remaining European G-7 economy—Italy—is also on the mend with unemployment at a five-year low. Nonetheless, the progress has been accompanied by questions about job quality that may play a role in the nation’s March 4 election.

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