Wages Grow Fastest in Decade, Beating Expectations

By Petr Svab

Private sector wages and salaries have been growing at the fastest pace since 2007, jumping one percent in the first quarter of 2018 alone, according to the Bureau of Labor Statistics.

The one percent mark has eluded the market for more than a decade, since the first quarter of 2007, before the economy plummeted into a crisis.

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Wages and salaries for Private industry workers in All industries and occupations, 3-month percent change, seasonally adjusted. (U.S. Bureau of Labor Statistics)

The first quarter growth may prompt a reshuffling of predictions that expected stagnating wage growth this year.

Korn Ferry consultancy predicted 3 percent wage growth over the entire 2018 year, while Mercer only predicted 2.9 percent.

By industry, the fastest growths occurred in aircraft manufacturing, transportation, sales, finance and insurance, and leisure and hospitality.

Mercer noted employers now tend to concentrate the highest pay increases to the most valuable employees.

“As organizations continue to contend with the changing jobs landscape and falling unemployment, they’re luring and keeping good workers by directing pay raises to star performers and using job promotions and nonmonetary benefits to keep in-demand workers engaged,” states the forecast released in October.

Especially workers with in-demand skills in jobs such as “social media communications professional” and “senior engineering technologist” expect pay raises upward of five percent this year, according to Mercer’s database, which reflects pay practices of over 16 million employees.

The faster wage growth is dampened by higher inflation as consumer prices rose by 2.4 percent over the past year (March-to-March).

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Consumer Price Index, 12-month percentage change, all items. (Screenshot via U.S. Bureau of Labor Statistics)

Also, growth in state and local government employee wages and salaries have somewhat slowed over the past year to 1.8 percent.

On the other hand, workers are starting to see higher take-home pay, as lower withholdings due to President Donald Trump’s tax cuts are kicking in.

Surveys suggested many workers did not see the tax cut boost to their paychecks until late in the first quarter.

Income at the disposal of households increased at a 3.4 percent rate in the first quarter, accelerating from the fourth quarter’s 1.1 percent pace. Households also boosted savings.

Wage growth is not the only economic indicator breaking expectations.

Jobless claims have fallen to the lowest level in almost 50 years, and the Gross Domestic Product is forecast to get a boost this year rarely seen in the past two decades.

The economy has been beating expectations for over a year thanks to the “Trump effect”—a boost to confidence in the economy linked to President Donald Trump’s cutting of regulations, taxes, and his planned investment in infrastructure.

Reuters contributed to this report.

From The Epoch Times

 

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