All presidents do this, so there’s no point in dinging team Trump for it. Did you expect Spicer to tweet “Thanks, Obama, for leaving us a healthy job market!”? Now that would have gone viral.

AD

The second thing we do, especially at a time like the present, is go straight into deep psychoanalysis of the members of the Federal Open Market Committee, the members of the Fed board that set the central bank’s benchmark interest rate. Members of the FOMC, from Chair Janet L. Yellen on down, have been suggesting that they might raise interest rates at their meeting here in town next week. Friday’s strong report — job gains as noted above, wages up 2.8 percent over the past year, unemployment at 4.7 percent, which the Fed thinks is consistent with full employment — raises the probability of another quarter-point rate hike. In fact, as of this moment, the markets put that probability at slightly above 90 percent.

AD

So that’s what we do down here in the capital when the jobs numbers come out. What’s weird about it is that there’s not a lot about actual people and how the report and its implications affect their lives. Instead, what you mostly get is political spin and a bit of monetary macro policy, both of which are pretty divorced from Main Street.

So let’s see if we can shift the focus to moderate- and low-income working families — the folks who spend less time obsessing over will-they-or-won’t-they raise rates at the Fed — because they’re too busy, you know, living life.

AD

There’s no question that the tighter labor market helps average folks, so the unemployment rate being a low 4.7 percent is good news for them. However, for middle- and low-income people to get ahead, the unemployment rate doesn’t just have to get low. It has to stay there for a long time.

The best source of information in this regard is a new paper by economist Elise Gould from the Economic Policy Institute. The figure below, which requires some unpacking, plots real hourly wage trends for low-, middle- and high-wage workers. “Low” means the 10th percentile wage: the level of pay where 10 percent of workers earn less and 90 percent earn more. “Middle” represents the median wage, a good proxy for middle-class earners, and “high” represents the wage that is higher than what 95 percent of the population makes. The data are indexed to zero in 2000, so the numbers show the percentage gain since then.

Sure enough, middle- and low-wage workers gained some ground over the past couple years (2015 and 2016) as the tighter job market gave them some of the bargaining clout they otherwise lack. You can see this in today’s jobs report, as the pace of average wage growth has picked up in recent months. In tight labor markets, say with unemployment below 5 percent, which has clearly been the exception in the U.S. job market in recent decades, employers often must bid compensation up to get and keep the workers they need.

AD

AD

That dynamic helped middle- and low-wage workers over the past couple years, but since 2000 their real hourly wage gains are up only about 5 percent. That’s 5 percent over 16 years, corresponding to an annual growth rate of a mere 0.3 percent. High earners were up almost 20 percent, or more than 1 percent per year, showing that economic inequality remains a factor in today’s job market.

Moreover, Gould breaks the data down by gender, which yields a pretty alarming finding, though one that might not be a big surprise for those tracking the political anger that played such a determinant role in the election. Yes, the median guy’s real wage grew about 4 percent over the past two years, but it hasn’t gone anywhere since 2000; it was about $19.50 in today’s dollars in 2000, and it’s still at about that level, which for the record is actually lower than it was in the early 1970s. For women, the median went up about $1 in real terms, from about $15 to about $16.

Now, let’s hitch the median guy to the median gal, and assume full-time, full-year work and a child or two. That yields them a market income of around $70,000. So, they’re definitely not poor, but with housing, health care, and given that both of them working full-time, depending on the kids’ ages, child care, they’re not rich either.

AD

AD

Economists have crunched some numbers to try to get at the real cost of living in various places across the country, accounting for the items just noted and more, including state and federal taxes. They find that $70,000 is enough to cover the basic family budget in some places in the country, like rural Nevada, which has a basic family budget estimate of about $70,000 for a married-couple family with two children. This family has room to spare in the Oklahoma City metro area (basic family budget estimate: $55,496), but won’t make it in New York (basic family budget estimate: $98,722). In most places they’re likely to live, a family making $70,000 can probably find a way to get by, but it’s not going to be easy.

And that’s middle-wage earners. Making that monthly nut is a lot harder for the bottom 50 percent, though Gould also shows that state and city-level minimum wage increases helped low-wage workers get ahead a bit more last year.

So forget the spin and the Fed (though we’ll get back to the Fed in a second) and think about today’s jobs report in this context. Thanks to the low unemployment rate, middle- and low-wage workers are finally seeing some wage gains. But men are just starting to make up lost ground, and middle-class families face a bundle of costs that make life at these wage levels pretty damn precarious.

AD

AD

If the job market stays as tight as it is today, or even tightens up a bit more (I argue there’s a bit more room to run before we hit truly full employment), wage gains to low- and middle wage workers will continue to grow. In other words, the combination of tight labor markets and higher minimum-wage levels can help working families finally claim some of the growth they’ve helped to generate.