- The Trump administration is concerned about the lack of wage growth in the economy despite the steady tightening of the labor market, Gary Cohn says.
- The White House economic advisor spoke after the Labor Department reported that average hourly earnings rose just 2.5 percent during the past year, below economists' estimates of 2.7 percent.
The Trump administration is concerned about the lack of wage growth in the economy despite the steady tightening of the labor market, White House economic advisor Gary Cohn said Friday.
Speaking shortly after the Bureau of Labor Statistics reported that nonfarm payrolls grew by 228,000 in November, Cohn said there is frustration that the numbers haven't resulted in better gains for worker paychecks.
"We're still not growing wages in this country," Cohn told CNBC's "Squawk on the Street." "We do believe that tax reform will help drive real wage growth in the United States, which is something really important to the administration."
Congress is hashing out the final details of a tax plan that will sharply reduce the corporate rate, give companies a break on bringing back profits stashed overseas and reduce levies on many Americans.
President Donald Trump has pushed the plan as part of his effort to stimulate growth that he said will amount to 3 percent or more annually. Critics, though, charge that the benefits skew too sharply to the top earners.
In the meantime, policymakers are stumped as to why wage growth remains meager despite a jobs market nearing full employment. Friday's payrolls report showed that average hourly earnings rose just 2.5 percent during the past year, below economists' estimates of 2.7 percent.
"We know that American workers want this tax bill passed. They'll start seeing their paychecks change early next year when withholding tax cards are changed," Cohn said.
"We think we are in a prolonged period of wage growth starting the beginning of next year, which is something we haven't seen for the last eight or 10 years, and that's really important to us," he added.
Despite the slow wage growth, the Federal Reserve has hiked its benchmark interest rate twice in 2017 and is expected to add one more increase at its policy meeting next week. In addition, the Fed has indicated that it could move again three times in 2018.
But Cohn is in the camp that the central bank will move slowly.
"We're in a relatively benign period here with the Fed," he said. "We haven't seen wage growth, we haven't seen inflation in the system, and people are trying to figure out where is the Fed ultimately going to go with rate policy. I think people are thinking it's going to be more of the same. Rates may trend higher, but they're going to trend higher at a very slow pace."
Trump has nominated Fed Governor Jerome Powell to take over as chairman when Janet Yellen's term ends in February, and a key Senate panel pushed the appointment to the Senate floor earlier this week.