Despite a mostly solid run of job growth, 2017 ends pretty much where it began — with a two-speed economy where wage growth is funneling to one end while the other lags behind.
Friday's nonfarm payrolls report brought with it news all too familiar to the post-crisis economy. The 228,000 jobs created formed a solid foundation, but the pedestrian 2.5 percent average hourly earnings growth left many scratching their heads wondering how a 4.1 percent unemployment rate, the lowest in 17 years, still wasn't producing fatter paychecks.
"The lack of wage growth at the aggregate level despite the declines in the unemployment rate and strong job gains remains a mystery," Joseph Song, U.S. economist at Bank of America Merrill Lynch, said in a note to clients.
"One possible explanation is that structural factors such as unfavorable demographics and industry-specific dynamics are playing a bigger role than the cyclical factors," he added. "However, we continue to believe that a falling unemployment rate will ultimately underpin wages."
The latter part of that statement represents the hopes and frustrations of economists everywhere from academia to Wall Street to the halls of the Federal Reserve in Washington, D.C.
With another month of strong job gains and ho-hum wage growth under its belt, 2017 is now yielding toward predictions — again — that the year ahead will finally be the one where income catches up.
"Due to a lack of available workers and sustained improvement in aggregate demand we expect wage pressures to be the primary economic narrative during the year," said Joe Brusuelas, chief economist at RSM. "Our forecast implies that wage growth during final three months of next year should be at or near 4 percent."