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Even as Iowa's unemployment rate has nosedived, the pay workers in the state are earning on the job has struggled to make gains.


Workers are transported between barges on small work boats on the Mississippi River while working on the Interstate 74 bridge project in Bettendorf on Thursday. New data shows that while Iowa's unemployment rate is low, worker wages are seeing little gain.

Iowa isn't alone. It's a trend across the country. But economists in the state say they, like others, are puzzled high demand for workers, which has been a mantra in Iowa, hasn't led to heftier paychecks.

"Economists can't explain this," said Dave Swenson, an economist at Iowa State University.

In the first quarter of 2018, average weekly wages in Iowa grew by about 2.5 percent in nominal terms, according to data from the federal Bureau of Labor Statistics.

That was about the same rate of growth as it was for all of 2017. The Quad-City metro area, which includes Scott, Rock Island, Mercer and Henry counties, also saw about a 2.5 percent rate of nominal wage growth for the year.

After inflation, is about 1 percent growth in real terms.

Swenson, who measures total wages and salary in Iowa over a four-quarter rolling basis, has reported a downward trend in wage growth since the first quarter of 2015, even as the overall economy was in its sixth year of recovery from the recession.

He has a number of theories about why Iowa's wages aren't behaving as one might expect.

He said people exiting the labor force have tended to be at the higher end of the earnings continuum and are being replaced by those earning less money.

Also, there's little evidence employers on the whole have been willing to bid up wages even as they need workers, he said. "I don't know why that is, other than some amount of tentativeness on the part of employers.'"

He also adds that while there has been decent job growth of late, the greater rate of growth has been in lower-paying industries.

The first quarter of 2018 has shown some signs of improving. Weekly wages and per capita income have ticked upward over that four-quarter rolling basis. And the state's per capita income grew by 5 percent in the first quarter of 2018, although that is a more volatile measure of incomes than other measurements.

The state's labor market also seems to be improving in ways other than just a falling unemployment rate. Some of that decline was driven by a smaller labor force in 2017, but in recent months that has turned around, too. The number of people who are employed in the state, as well as those on the job or looking for work, has gone up.

Since February, the number of people employed in Iowa has ticked upward by 10,000 jobs after remaining steady or declining through 2017.

Peter Orazem, an economist at Iowa State University, figures that the improving labor market will eventually add up to healthier wage increases. "I think they almost have to," he said.

Ernie Goss, an economist at Creighton University in Omaha, said he sees higher growth and inflation creating upward pressure. He pointed to a report earlier this week that said wages and salaries across the country went up 2.8 percent for the 12-month period ending in June, up from 2.3 percent the year before.

He also noted increasing capital investment and said it's harder for places like the Midwest to supply workers because of slow population growth.

"There's mounting pressure to increase wages," he said.

Goss, though, warned that trade friction between the U.S. and other countries, like China, the European Union, Mexico and Canada, could stop these trends.

Wilbur Ross, the commerce secretary, downplayed the impact of the trade situation in March, saying the tariffs on steel and aluminum would have a limited effect on prices. But Goss said trade accounts for a big part of the country's growth.

"It's the part that will whack points off growth and tends to hit the manufacturing and ag sectors harder," he said.

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