Will wages rise in jobs recovery?

If generosity is a theme for this season, then December got off to a cheery start when the federal government issued its best employment report in nearly three years.

The economy added 321,000 jobs in November, the largest monthly gain since January 2012. Not only did those numbers exceed expectations, they set the stage for what looks like a banner year on the jobs front. If the trend holds, 2014 could be the best year for job creation since the late 1990s.

Meanwhile, the unemployment rate held steady at 5.8 percent, down from 10 percent five years ago and 7 percent last November. Perhaps most significantly, hourly wages rose a few cents and the average workweek lengthened a bit, although it's too early to predict a full turnaround on wages, which continue to weigh down an otherwise robust recovery.

Even so, the jobs report offered more evidence that the United States has emerged from the deep recessionary hole of 2007-2009. With improving job prospects, cheaper gasoline and a hint of higher paychecks, the public should feel optimistic about an economy that's outperforming all major competitors. As Brian Beaulieu, CEO of ITR Economics, recently told a Minneapolis audience: "Americans are 4.8 percent of the world's population and get to live in 22.7 percent of the world's economy. So, ask yourself, where else would you rather be?"

For Minnesotans, the news is even better. The most recent numbers (October) show Minneapolis-St. Paul's jobless rate — 3.2 percent — leading all other large metropolitan areas and helping to solidify the Twin Cities' position as the Midwest's second-largest metro economy, behind Chicago's.

The state, meanwhile, enjoys the fifth-best unemployment rate in the nation — 3.9 percent — behind only North Dakota, South Dakota, Nebraska and Utah.

"We recovered more quickly than most other states and have benefited from our diverse economic base," Laura Kalambokidis, the state economist, told an editorial writer. Less reliance on manufacturing and construction and more on professional service and health care has helped Minnesota's employment profile, she said.

Moreover, the November hike followed a usual pattern: Most of the increase went to supervisors and managers, while the average workweek — 33.8 hours — continued to fall well short of the work time that millions of rank-and-file workers would prefer.

Frozen wages at the middle and lower ends of the pay scale are nothing new, of course. They are the key reason for the growing inequality that has beset the United States and some other Western economies since the late 1970s. Textbook economics suggests that wages should closely match productivity. Indeed, in the postwar period (1947-1973) both rose together by an average of 2 to 3 percent per year. Then, starting about 1979, while U.S. productivity surged ahead, wages at the middle and lower levels flattened or, at the low end, declined in relative terms.

Labor productivity rose by 93 percent between 1979 and 2012, while wages and benefits crept up by just 38 percent — with nearly all of the gains going to rising health insurance costs rather than to improved living standards. All told, wages declined about 1 percent per year relative to productivity during those 33 years, while compensation for those in the top 1 percent rose an astonishing 153 percent.

How and why could that happen? Economists and others offer a grab bag of explanations, but globalization is almost certainly the central culprit. The entry of China, India, Brazil and the former Soviet Union into the world economy effectively doubled the size of the labor market without adding much global capital. The "flattening" effect on a once-well-paid U.S. labor force was a major hit. Other related factors added to the misery. Advances in technology, failures in the U.S. education and training systems, and demographic changes have been offered up among likely contributors.