U.S. Wages Maybe On The Rise – Money Pacers
U.S. Wages Maybe On The Rise

U.S. Wages Maybe On The Rise

(Business) U.S., wages maybe on the rise at a pace that is probably faster than the recent data suggest, according to a leading labor economist at the U.S. central bank.

Officials at the Federal Reserve and other economists have publicly puzzled over sluggish wage growth despite a 16-year low unemployment rate. Some observers have speculated that the lack of faster pay rises may be holding down inflation and keeping Americans from benefiting as much as they should from a moderately expanding economy and some Fed policymakers have said that slow-growing wages make them wary about pressing on too quickly with interest-rate hikes.

In a blog post Monday titled “The good news on wage growth,” San Francisco Federal Reserve Bank’s research chief Mary Daly and Arizona State University economics professor Bart Hobijn noted that workers who are newly entering or returning to full-time employment usually earn less than the typical full-time employee.

“This means that strong job growth can pull average wages in the economy down and slow the pace of wage growth,” Daly and Hobijn wrote.

Weekly earnings rose at an annualized 4.2 percent pace in July, a government report showed earlier this month, the fastest pace since before the 2007-2009 financial crisis. That is an improvement but “the underlying story about wage growth may be even better than the headline number suggests,” they wrote.

To substantiate the news, tradingeconomics.com recently wrote, “Wages in the United States increased 2.95 percent in May of 2017 over the same month in the previous year.”

Daly and Hobijn argued Monday that wage growth is already taking hold, particularly for workers who are continuously employed. Overall wage growth is held back, they argued, as previously unemployed or underemployed workers start full-time jobs, and as highly paid baby boomers retire.

But recent data suggest that those effects may be waning, potentially signaling stronger wage growth ahead, they wrote.

In other news, for decades, the story was simple: The gap between the rich and the poor grew ever-wide as incomes increased faster at the top than the bottom. The story was true, too. Wages have been rising faster for the top 5 percent than for the bottom 20 percent almost every year this century.

But in a remarkable reversal, annual wage growth has been greater (as a percent) for the poor than for the rich in the last few years. A new report by the left-leaning Economic Policy Institute found that wages grew faster in 2016 for the poorest quintile than for the richest. The trend was particularly pronounced for white workers. The poorest 10 percent of white workers collectively saw a 5.1 percent raise in 2016, twice as faster as the 2 percent growth among the richest decile percent. Read more at the Atlantic.com.

One reason for the recent wage increase, “Sharp increases in consumer and business confidence can have real consequences that show up in increased hiring and investment,” said Douglas Holtz-Eakin, a former director of the Congressional Budget Office who advised Senator John McCain, Republican of Arizona, during his 2008 presidential campaign, the nytimes.com wrote.

Don Briscoe
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Don Briscoe

Finance educator, advisor, and leading voice in the global financial literacy movement.Founder and editor of MoneyPacers.com.He lives and enjoys life with his family in New York.
Don Briscoe
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