If Economists Were Right You Would Have a Raise by Now Bloomberg Business

Peter Gosselin and Jennifer Oldham: If Economists Were Right, You Would Have a Raise by Now: “Jobless levels… [and] wage-growth rates for each state…. The former could account for much of latter during the 1980s, [but] the two variables have fallen increasingly out of sync….

…Mainstream analysts such as Mark Zandi, chief economist of Moody’s Analytics Inc. in New York, say the recession that began in December 2007 was so deep and damaging it left a large pool of untapped labor that’s not fully reflected in the unemployment rate. Companies can draw on this pool without having to raise pay. Despite its size, Zandi said, the economy now is adding jobs at such a clip that this labor pool will be drained quickly and wages finally will start rising again. ‘There are already early signs of the wage revival and by this time next year it will be undeniable,’ he said.

Analysts such as Mary Daly, the associate research director at the Federal Reserve Bank of San Francisco, trace recent slow wage growth to another aspect of the 2007-2009 recession: Employers didn’t cut the wages of workers they retained. Now that employers have resumed hiring, they’re doing so at the same or lower pay, which is holding back wage growth, Daly and colleague Bart Hobijn wrote in a Jan. 5 San Francisco Fed paper. The implication is that as the expansion continues, wages eventually will start growing again…