Illustration: Aïda Amer/Axios

The job market is defying expectations, but there's a glaring flaw, Axios' Courtenay Brown writes.

Why it matters: With weak productivity and the fading tax cut stimulus, the labor market is the standout to keep the economic boom going. It's largely done the job so far — unemployment is near a half-century low and the economy has added 285,000 jobs on average over the last 5 months. But wage growth throughout the second longest economic expansion isn't yet measuring up to what we've seen in the past.

The continuation of that theme could be a drag on growth because it would represent a missed opportunity to pull more people into the labor force, James Wilcox, an economics professor at U.C. Berkeley's Haas School of Business, tells Axios.

  • "People get encouraged to work more when you pay them more," he said.

Be smart: The tight labor market is starting to deliver fatter paychecks, but wage growth has pulled back from its acceleration late last year and remains below pre-crisis levels.

  • This is odd, considering the record number of job openings that clearly reflect demand and hunger for workers.
  • At the White House this week, CEOs of major companies including Apple and Home Depot said they were finding increasingly scarce applicants for open jobs.

What's happening: So-called prime-age workers are hopping back into the labor force at the highest rate since 2009 (as reported in Axios PM), but not as fast as they were in the late 1990s.

  • A pick-up in wages should bring more people into the workforce — which could sustain the stellar job gains — but current wage growth might not be strong enough to pull others off the sidelines.
  • "If we have absorbed the whole shadow labor force, then we'll start to see wages going up," CUNA Mutual Group's chief economist Steve Rick tells Axios.

The bottom line: A lot is hinging on significant gains in the participation rate.

  • More people entering the workforce "improves the supply potential [of the labor force], ...and it helps contain income inequality at a time when those on the lower echelons of the income distribution scale have already and persistently fallen well behind," Mohamed El-Erian, chief economic adviser at Allianz, wrote in a Bloomberg op-ed.

And there are questions about how many more would-be workers are out there. "It will tap out probably by this summer," CUNA Mutual Group's Rick said. "We will be reaching the limit of how many people are still on the sidelines waiting to jump in."

Go deeper: America's wage crisis no longer looks temporary

Go deeper

Updated 12 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 10:30 a.m. ET: 30,217,420 — Total deaths: 946,847— Total recoveries: 20,554,349Map.
  2. U.S.: Total confirmed cases as of 10:30 a.m. ET: 6,677,516 — Total deaths: 197,682 — Total recoveries: 2,540,334 — Total tests: 91,546,598Map.
  3. Politics: Trump vs. his own administration on virus response.
  4. Health: Massive USPS face mask operation called off The risks of moving too fast on a vaccine.
  5. Business: Unemployment drop-off reverses course 1 million mortgage-holders fall through safety netHow the pandemic has deepened Boeing's 737 MAX crunch.
  6. Education: At least 42% of school employees are vulnerable.
Dan Primack, author of Pro Rata
18 mins ago - Economy & Business

U.S. nutritional supplements retailer takes first step to sell to China’s Harbin Pharma

Illustration: Sarah Grillo/Axios

GNC Holdings, the Pittsburgh-based nutritional supplements retailer, received bankruptcy court approval to sell itself to China’s Harbin Pharma for $770 million, although the deal still faces U.S. political pressures over how GNC customer data is protected.

Why it matters: It's a reminder that the U.S.-China merger mess goes well beyond smartphone apps, with Sen. Marco Rubio asking for a CFIUS review.

Ben Geman, author of Generate
1 hour ago - Energy & Environment

Tallying Trump's climate changes

Reproduced from Rhodium Climate Service; Chart: Axios Visuals

The Trump administration's scuttling or weakening of key Obama-era climate policies could together add 1.8 gigatons of carbon dioxide equivalent to the atmosphere by 2035, a Rhodium Group analysis concludes.

Why it matters: The 1.8 gigatons is "more than the combined energy emissions of Germany, Britain and Canada in one year," per the New York Times, which first reported on the study.