The January jobs report from the US Bureau of Labor Statistics showed that average hourly wages had risen 2.9 percent over the preceding year. Though not quite the 3.5 or 4 percent growth economists would like to see, that figure represents an encouraging sign that the American labor market’s perplexing combination of low unemployment and stagnant wages might finally be abating.
A new analysis from Reuters expands on the good news, finding that last year’s wage gains were geographically broad, not concentrated in a small number of states or cities. Ann Saphir, Jonathan Spicer, and Howard Schneider report:
The Reuters analysis of the most recent data available found that in half of the 50 states, average hourly pay rose by more than 3 percent last year. That’s up from 17 states in 2016, 12 in 2015, and 3 in 2014. Average weekly pay rose in 30 states, also up sharply from prior years, the analysis showed. Unemployment rates are near or at record lows in 17 states, including New York, up from just five in 2016, the Reuters analysis shows. …
To be sure, some states like Idaho with very low unemployment continue to have slow wage growth, while some like Delaware with very strong wage growth still have jobless rates well above their record lows. And the share of gross domestic product that feeds back to labor as compensation has only edged slightly higher this decade, after generally declining since the 1970s, suggesting workers have a long way to make up ground. Yet the state-level data hints at a first step.
The analysis found that no states experienced negative wage growth in 2017, whereas 10 states did in 2015 and 2016, even as the national unemployment rate fell below 5 percent. Economists had been puzzled as to why wages were not growing in line with economic models as the country recovered from the Great Recession, the economy grew, and joblessness steadily declined. One explanation is that the labor market had more slack than was apparent, as underemployed Americans sought out full-time work and people who had dropped out of the labor market re-entered it. A more troubling possibility is that structural changes in the economy have been preventing job growth from driving wage growth
Whatever the cause of that stagnation, the labor market appears to have truly tightened now, as employers are having a harder time finding, attracting, and retaining talent even in low-skill, hourly roles that normally feature low pay and high turnover, such as retail store staff. The 2017 State of the Labor Market report for the United States from CEB, now Gartner (which CEB Recruiting Leadership Council members can access here) finds that some of the most in-demand roles right now include tractor-trailer drivers and retail salespeople as well as high-skill tech roles like software developers.
With such stiff competition for talent at all levels and in so many industries, the battle for talent is certainly the key driver of growing wages in the US today.