A weak jobs report Friday provided further evidence of a slowing economy and ammunition for the Federal Reserve to stop raising interest rates. Wage inflation, however, continued to be above the Fed's comfort level, thanks in part to workers like Carlos Gonzalez.
The 33-year-old Bellflower resident, a program manager at a Torrance aerospace parts supplier, said he just got a 31% raise, bringing his pay to $57,000.
"It surprised me because personally I never expected this," said Gonzalez, a high school graduate and father of two who has been with his employer for a decade and worked his way up from the shipping department.
Average hourly wages rose 3.8% year-over-year in July, according to the Labor Department report Friday, high enough to raise eyebrows at the Fed, economists said. But some analysts said such wage gains are not a major cause of rising inflation because many workers are not sharing in the pay raises. High prices for energy and other commodities, not wages, are the main culprit behind rising inflation, these analysts said.
"Wages are still very much under control," said Bernard Baumohl, director of the Economic Outlook Group in Princeton Junction, N.J.
The average wage is being pushed higher by employers in such industries as aerospace, financial services, computer technology and certain types of manufacturing. They are pushing wages up to attract highly skilled workers or retain the trained workers like Gonzalez whom they already have, analysts said.
But pay raises for most middle- and lower-income workers -- in such industries as retail, construction, hotels and restaurants -- are still relatively modest or nonexistent, they said.
That is typically not the type of wage pressure that prompts employers to raise prices, Baumohl said.
Given wage stagnation among lower- and middle-class workers, further Fed rate hikes would hurt the very workers whose spending is driving the economy, he said.
"We have to remember that most of the stimulus -- most of the shopping and spending in the U.S. -- comes from middle- and low-income people. And they have not seen an increase in wages," Baumohl said.
Meanwhile, the subpar net increase of 113,000 jobs in July and a surprising rise in unemployment to 4.8% from 4.6% gave the Fed enough evidence to pause its rate-hiking program at its next policy-making meeting Tuesday, many analysts said. That would become the first such break since the Fed starting tightening credit two years ago.
