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​Wondering where your pay raise is? Blame "hidden slack"

With the economy on the rebound, workers were supposed to have seen the benefits in their paychecks by now, but wage increases are still lagging. What went wrong?

The answer boils down to a series of issues that may be invisible to the average worker, such as the sizable slice of working-age Americans who are "underemployed," but are now reentering the job market, pushing wages down, as well as the threat of overseas competition, according to a Wall Street Journal analysis of Labor Department data.

The 9 best U.S. cities for jobs
The 9 best U.S. cities for jobs

The ranks of the underemployed have created an unseen labor pool, given that these workers -- many of whom are working part-time but want to have full-time jobs -- aren't included in the unemployment rate.

Those Americans are moving back into the labor market, with Gallup noting that its measure of underemployment slipped to 14.7 percent in May, the lowest level since it started tracking the issue on a daily basis in 2010. While that's a positive change for those workers, it's putting pressure on wages across the board, given that new employees are coming from what has been an invisible labor pool to compete with unemployed workers.

Many of those underemployed workers are eager to start working more hours. The inability to find full-time jobs or enough hours to pay the bills has become a serious issue for many households, with a recent Federal Reserve survey finding that about 36 percent of non-self-employed workers wanted to work more hours at their current wage. For all part-time workers, that jumped to almost half of the survey's respondents.

Other brakes on wage growth include rivalry from overseas companies, creating concern among executives that higher wages will mean losing a competitive edge, and the continued lingering psychological impact of the recession, the Journal noted.

Business executives remain cautious about the economy, with a new poll from the American Institute of CPAs finding that confidence about its prospects are eroding. Employee and benefit costs now rank as the second biggest challenge cited by business executives, following regulatory requirements, the survey noted.

Wages are growing again, but not as fast as before the recession. Wages and salaries rose 2.6 percent in the first quarter compared with a year earlier, but far below what's considered a "normal" rate of 3 percent to 4 percent.

On top of that, median household income has a long way to climb before it reaches pre-recession levels. The April median household income was $54,578, or almost 3 percent below the median of $56,207, the month the recession started. At the same time, costs of everything from rent to food has continued to climb, meaning that many households are earning less than they were seven years ago, but paying more to keep their standard of living.

In about two-thirds of 33 cities studied by the Journal, wage growth has lagged rates seen before the recession, even though unemployment has continued to decline. That's bucking the widely held belief that when a labor market tightens, wages will rise as employers compete for workers.

One company in Columbus told the publication that it's giving smaller raises than before the recession, partly because it's found the pool of workers looking for jobs was larger than suggested by the unemployment rate. Many of the company's new hires have been temp workers seeking full-time work, as well people reentering the job market.

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