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The last official figures from the US Bureau of Labor Statistics before Tuesday’s presidential election show that the economy added 161,000 jobs last month, which CNN Money describes as a “solid gain”:
Unemployment fell a tick to 4.9%. That’s down by half since 2009, when unemployment peaked at 10%. October’s gains marked the 73rd consecutive month of job gains for the U.S. economy. The September job gains were revised up to 191,000 jobs from the first read of 156,000.
Wage growth — one of the last metrics to move in the right direction post-recession — continued to show signs of accelerating. Wages grew 2.8% in October compared to a year ago, the fastest monthly growth since June 2009. “We’re going to see stronger wage growth going forward as we see a labor market that’s approaching full unemployment,” says Jacob Duritsky, vice president at Team NEO, a nonprofit that focuses on economic development in northeast Ohio.
The growth in wages is the most encouraging sign in the report, economists tell the New York Times:
“It was pretty positive across the board,” said David Berson, chief economist at Nationwide Insurance, adding that “most importantly, we got a nice jump in average hourly earnings and that actually corresponds with other data.” … As Vincent Reinhart, chief economist at Standish Mellon, explained, “The main message is from the payroll report: Jobs are being created and earnings are going up.” But a report that goes “right down the middle of the fairway,” he added, “means you can spin it any way you want.” …
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At Talent Economy, Lauren Dixon discusses which broad indicators of economic health should influence organizations’ compensation choices:
Economic indicators help leaders get a sense of the health of the overall economy, but when it comes to setting compensation, experts say using these figures as a benchmark remains perilous. “A growing economy should drive down unemployment and support wage growth, which implies that a CEO should be vigilant about the need to compete for talent via compensation packages,” said Josh Wright, chief economist at iCIMS, an HR software company in Matawan, New Jersey. …
That isn’t to say executives shouldn’t follow certain indicators to pair with a more focused compensation analysis strategy. According to iCIMS’ Wright, the major macroeconomic indicators executives should look at when considering their companies’ compensation strategies include:
- Costs of living.
- Price pressures of consumers.
- Local housing markets.
- Consumer Price Index.
- Personal Consumption Expenditures.
This brings to mind the preliminary discussion taking place in some executive circles about eliminating regular, annual salary increases and tying individual increases specifically to clear step changes in employees’ skills that can be assessed. For businesses, the argument here is that we need to tie pay increases more clearly to worker outcomes instead of an abstract trigger like the CPI or trade agreements that may affect our workforce differently than others. That way, rising talent will get the raises they deserve, regardless of economic conditions.
Labor quality—the workforce’s overall level of education and experience—is an important factor in productivity, GDP growth, and the general health of the economy. The quality of American labor has increased every year since the late 1970s, but this year, it may barely grow at all, Business Insider‘s Bob Bryan reports. In a recent note to clients, JP Morgan economist Michael Feroli warned that labor quality has been contributing less than 0.1 percent to GDP growth in recent years, and that figure is projected to drop almost to zero this year. Even more worrying is that this decline looks like a trend, not an aberration, so labor quality growth may remain low or nonexistent for a while. Bryan explains why:
After ending 2015 on a high note, the Labor Department’s latest employment report shows that the US economy added a more modest number of jobs in January, though wages rose and the unemployment rate continued to tick down, Reuters reports:
Nonfarm payrolls increased by 151,000 jobs last month and the unemployment rate was at 4.9 percent, the lowest since February 2008, the Labor Department said on Friday. Data for November and December was revised to show 2,000 fewer jobs created than previously reported. Economists polled by Reuters had forecast employment increasing by 190,000 and the jobless rate steady at 5 percent. Also taking the sting from the softer payrolls number, employers increased hours for workers. Manufacturing, which has been undermined by a strong dollar and weak global demand, added the most jobs since August 2013. …
Even with slower job growth, wages rebounded sharply after holding steady in December. Average hourly earnings increased 12 cents or 0.5 percent. That left the year-on-year gain in earnings at 2.5 percent as the unusually strong wage gains seen in January 2014 dropped out of the picture. But with the jobless rate in a range most economists associate with full employment, wage growth is expected to pick-up this year.
Overall, despite the mixed signals it’s sending, the report will help allay investors’ fears of the economy backsliding into a recession, economists tell the New York Times:
The economy added nearly 300,000 jobs last month while unemployment held steady at 5 percent, according to the latest jobs report from the Department of Labor. The strong numbers exceeded economists’ already high expectations for the end of 2015; October’s and November’s job figures were also revised upward. Overall, the economy added 2.65 million jobs last year.
These solid signs of growth further support widespread expectations of a robust and competitive hiring landscape in 2016. The latest CareerBuilder survey finds that 36 percent of employers plan to increase their full-time staff this year:
Looking at specific industries, financial services and information technology have already been experiencing accelerated growth, and are expected to outperform the national average – at 46 percent and 44 percent, respectively. Manufacturing (37 percent) and health care (36 percent) are expected to mirror the national average.
Temporary and contract employment is also projected to pick up in 2016, with 47 percent of employers planning to hire temporary or contract workers, up slightly from 46 percent last year and 42 percent in 2014. While temporary and contract employment enables employers to maintain flexibility in their workforce, it also enables them to fill in-demand roles on a short-term basis while they look for more suitable replacements.
Many employees are also planning to change jobs, so recruiters can look forward to a busy year.