Slow wage growth has long been among the biggest problems for the American economy over the last several years. However, wages are finally going up and they’re starting to grow faster and faster.
No matter what tracker you use, everything is looking a little rosier.
The basic measure — average hourly earnings from the monthly jobs report — has hit cycle highs three times in the past five months and has been accelerating of late.
Additionally, the employment cost index (considered to be the most comprehensive measure of wages) has been moving upwards over the past few years.
Other measures of wages are also increasing at a more rapid pace recently, according to JPMorgan Economist Robert Mellman. He highlights two measures: the Bureau of Labour Statistics’ usual weekly earnings survey and the Federal Reserve of Atlanta’s wage tracker.
- Usual weekly earnings: “Although the series is inherently volatile, median usual weekly earnings has been accelerating irregularly from 1.9% average gains in 2014 to 2.3% in 2015 and 2.8% [year over year] in 1Q16.”
- Atlanta Fed wage tracker: “The Atlanta Fed wage tracker also has been accelerating, from 2.7% growth in 2014 to 3.3% in 2015 and 3.4% [year over year] in the latest April reading.”
In fact, the most recent Atlanta Fed release pegged wage growth at a post-recession high.
The increase in wages is another sign that the labour market is getting tighter despite slowing headline jobs growth. As companies are fighting over fewer workers, they’re having to pay more for the laborers available.
The wage growth situation is not perfect, as these measures are still not back to where they were before the financial crisis, but it is certainly encouraging to see wage growth catching on.