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Waiting for that big raise? You're not alone

A customer receives cash change from a cashier at a Wal-Mart Stores Inc. location in the Porter Ranch neighborhood of Los Angeles, Calif.
Patrick Fallon | Bloomberg | Getty Images
A customer receives cash change from a cashier at a Wal-Mart Stores Inc. location in the Porter Ranch neighborhood of Los Angeles, Calif.

It's been a relatively good year for American workers looking for a raise.

Last year, after-tax personal income rose by 3.5 percent, after adjusting for inflation. That's the biggest gain since 2006, before the Great Recession sent the unemployment rate soaring and tore a multitrillion-dollar hole in American's household savings.

Continued improvement in the job market is a major reason incomes are picking up. Since the depths of the recession, the jobless rate has fallen in half. With fewer jobless workers willing to accept whatever salary they're offered — and skilled workers in short supply able to negotiate a better wage — employers are having a harder time keeping paychecks in check.

But the gains are still relatively weak by historical standards.

Since the recession ended in 2009, wage gains for American workers have lagged every recovery since 1960. That may be one reason that — for many workers — the current economy still feels weak.

The weak recovery may also help explain why consumer spending remains sluggish. Spending was flat in December, after expanding slowing to an annual gain of just 3.4 percent in 2015 after advancing 4.2 percent in 2014.

That weak pace of spending, in turn, is one of the reasons the overall U.S. economy is showing only moderate strength. Consumer spending makes up about two-thirds of the overall economy, which expanded at an annual pace of just 0.7 percent in the fourth quarter.

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With incomes picking up and spending slowing, American households are stashing most of the difference into savings, which surged in December to $753.3 billion, the highest level since December 2012.

That jump extends a savings spree that outpaces past recoveries. But consumers have a lot of lost wealth to make up for after the recession did much more damage to savings than any of the last eight downturns.

The outlook for wages is far from clear. A lot depends on whether the global economy continues to slow and depress demand for U.S. exports. A strong dollar also isn't helping; it makes American exports more expensive in local currencies.

Economists have debated the causes of sluggish wage growth since the phenomenon first took hold over a decade ago. Some have blamed globalization for putting downward pressure on American paychecks. Other analysts believe the relatively strong employment data mask underlying weakness in the job market that is slowing wage gains.

Still others note that, with inflation lower than in any of the last eight recoveries, real wages gains have left households with relatively strong spending power. The recent plunge in gasoline prices has also taken some of the pressure off consumers.

Over the longer term, wages have also been held back by gains in productivity that have allowed employers to continue to produce more with the same number of workers. Advances in technology — from factory robots to the Internet to 24/7 cellphone access — have gotten much of the credit for the productivity boost. But economists are divided on how much longer those productivity gains will continue.

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