Weekly hours worked suggest slowly improving labor market, earnings growth still sluggish

Average hourly earnings rose 1.7% in October versus one year ago, holding at the same pace for the third straight month (see chart 1).  Sluggish wage growth is not a surprise given the available supply of labor and the high level of job insecurity that many must grapple with.
 
It is helping to keep inflation in check since labor costs are the largest expense for most businesses.  Without pressure from rising wages, most companies are not being pressed to raise prices. Nor could most make all but the smallest price increases stick in the current environment.

However, the lack of any meaningful wage gains is a major factor holding back consumer spending.



Meanwhile, the small improvement in average weekly hours (see chart 2) and the year long upward trend suggests that the economy and labor market continue to slowly improve.



It’s not a surprise that hiring has lagged the rise in hours worked.  Employers aren't seeing much in they way of new business. And if sales are rising, they would rather have their current staff handle what comes through the door - at least until employers sense the recovery is on a firmer footing.