While most workers’ wages haven’t shown marked increases in several years now, the price of keeping them working has been steadily rising.

Last week, the US Bureau of Labor Statistics released its quarterly employment cost survey, which showed that in the second quarter overall compensation costs rose by 0.5 percent in the second quarter. First quarter costs were also revised upward, bumped from the initially estimated 0.3 percent increase to 0.5 percent. If state and government workers are excluded, compensations costs were up 1.9 percent between April and June.

In the second quarter wages and salaries, which make up about 70 percent of compensation costs, rose 0.4 percent while benefit costs, which make up the remaining 30 percent, were up by 0.4 percent.

Among occupational groups, the cost of employing managers and professionals were up by 2 percent while the cost of service industry workers was up 1.6 percent.

Unfortunately for the economy, though, wages aren’t keeping up with overall costs.

If you look at the breakdown of industries that have produced most of the job growth so far this year, lower paying services jobs account for about 61 percent of the new jobs year-to-date, despite the fact that those low paying industries only account for 39 percent of all US jobs according to government data. On top of that, part-time work has made up 77 percent of job creation so far in 2013. In June, part-time work accounted for more than 65 percent of the 162,000 new jobs created that month.

One of Corporate America’s biggest lessons learned during the Great Recession was how to do more with less, leading businesses to rely on technology to accomplish tasks more cheaply and efficiently. As a result, they can squeeze more productivity out of a single worker and negate the need to hire more people.

But lower paying service jobs, whether they’re waiters and cooks or store clerks and janitors, are largely immune from automation. On top of that, many service industry companies have been opting to hire more part-time workers rather than make existing staff full-time, to sidestep the health care reform law’s mandate to provide medical coverage to full-time staff.

New regulation and the hiring of part-time workers in typically lower paying jobs are just two of the reasons why costs are rising. Incidentally, that’s also why the US economy has managed to add an average of 200,000 jobs per month this year. while the economy grows at less than 2 percent annually.

For those lower paid workers, their paychecks are becoming even more meager; data showed that average hourly pay fell by 2 cents last month. So while the impact of those higher employment costs is being passed along to consumers, their wages aren’t keeping pace.

Until we get closer to full employment, there’s little chance of a meaningful increase in the average worker’s wages despite rising employment costs. And we’re not even close to that point yet.

The Bureau of Labor Statistics tracks the number of multiple job holders, or those who are holding down more than one job. Anecdotally, most of us have heard stories of folks who work more than one job just to make ends meet and the data bears that out. Prior to the recession, less than 3 percent of US workers held more than one position. This past July that number rose to 4.8 percent, from 4.7 percent in July 2012.

While that increase might not sound huge, it’s been steadily ticking up for the past three years. Most significantly, the number of workers with full-time positions who work a second part-time job has been steadily growing, as full-time wages don’t keep up with expenses.

I strongly suspect we will have to see the number of multiple jobholders considerably increase before we see a trend towards full-time hiring.

But inflation keeps marching higher, with the most recently released personal consumption expenditure (PCE) index data—the Fed’s favored inflation measure—up 0.4 percent. Over the past year, the index has risen 1.3 while the core PCE index, which excludes food and energy costs, was up 1.2 percent. As I’ve said before, I believe the PCE and consumer price index both dramatically understate the true rate of US inflation.

But the underlying trend in that data shows that inflation is spreading beyond just the admittedly volatile costs of food and energy even as wages stagnate. And on an inflation-adjusted basis, after-tax incomes were down 0.1 percent in June.

Because of slow income growth, consumer spending may whipsaw up and down, but it isn’t likely to make meaningful gains from here. This trend will impede economic growth and further discourage full-time hiring, perpetuating a rising-cost/low-wage environment.

For now, we’re clearly locked into a less-than-virtuous economic cycle.

Portfolo Updates

Thrive Portfolio holding Mitsubishi Estate (Japan: 8802, OTC: MITEY) reported better-than-expected earnings in its first quarter, despite a 5.2 percent dip in its residential business income.

Revenue from residential operations declined from JPY63.7 billion in the first quarter of last year to JPY60.4 billion, as few condominiums became available for sale.

That was more than offset by a 19.9 percent year-over-year jump in building business revenue to JPY129.1 billion from JPY107.7 billion. Revenue from commercial property operations shot up 489.7 percent to JPY15.4 billion. The gains were primarily due to building sales.

Total net income rose 43.8 percent year-over-year to JPY17.1 billion, with earnings before interest, taxes, depreciation and amortization (EBITDA) of JPY50.2 billion.

While rents held steady on a sequential basis, vacancies ticked up from 3.98 percent in the previous quarter to 8.33 percent due to building completions. Management forecasts that vacancies should fall to 6 percent in the next quarter and normalize around 4 percent by next year, as new tenants are brought in.

Thanks to both strong residential and commercial property demand, particularly in Tokyo’s fancier business districts, Mitsubishi Estate maintained its full-year EBITDA guidance at JPY242 billion and net income at JPY58 billion.

In addition to benefiting from Japan’s improving economic situation, the company should also pick up a tailwind from rising property values, though that will be somewhat offset by higher construction material costs.

Continue buying Mitsubishi Estate under JPY2,900.