The warehouse club retailer Costco announced on Thursday that it was raising starting wages for its US employees by $1 to $14 or $14.50 per hour, effective June 11, while other workers will receive raises of 25 to 50 cents an hour, Seattle Times business writer Benjamin Romano reported:
The raise, to be paid for with part of Costco’s savings from U.S. federal corporate tax cuts that took effect this year, will go to upwards of 130,000 U.S. employees, costing the company about $110 million to $120 million a year before taxes, Costco chief financial officer Richard Galanti said during the company’s fiscal third quarter earnings report Thursday. … Costco competitors including Target and Walmart announced wage increases and bonuses for their employees tied to the tax cuts earlier this year.
“But not everyone at Costco is happy,” Romano notes:
Some salaried employees, including some in the company’s Issaquah corporate headquarters, say they’re being left out of the equation as Costco spreads around the tax benefit. One person, who asked not to be named for fear of retaliation, said after the wage increase announcement, “I would make a considerable amount more going back and gathering carts for the warehouse in the parking lot.”
Raising pay and benefits for entry-level hourly employees has been a growing concern for US retailers and other low-wage employers in recent years as the labor market has tightened, making even low-skill workers more challenging to attract and retain.
The US economy added 223,000 jobs last month and the unemployment rate fell to a post-recession low of 3.8 percent, the latest jobs report from the Bureau of Labor Statistics showed on Friday. May continued the US labor market’s growth streak into its 92nd month, the longest such expansion in history. New jobs numbers were also revised upward by a total of 15,000 for the preceding two months, to 159,000 jobs in April and 155,000 in March. Retail, health care, and construction were the leading sectors adding jobs last month.
Compared to the previous year, the unemployment rate was half a percentage point lower in May, with the total number of unemployed persons reduced by 772,000. The number of long-term unemployed was little changed from April to May, standing at 1.2 million, but this figure had also declined by 476,000 over the past year. Underemployment remains an issue, with 4.9 million US workers working part-time who would prefer to be working full-time.
In the first five months of 2018, the workforce has grown by an average of 207,000 jobs per month, the Wall Street Journal adds, beating the average monthly growth of 182,000 in 2017. May’s numbers exceeded the expectations of economists surveyed by the Journal, who had expected 190,000 new jobs and a 3.9 percent unemployment rate. The last time the US recorded a 3.8 percent rate was in April 2000, and the last time before that was in 1969. The falling rate reflects a mix of positive and negative developments, however, as the labor force participation rate ticked down from 62.8 to 62.7 percent and the number of people not in the labor force increased by about 170,000.
Wage growth remains real the sticking point in the US labor market. Average hourly earnings in the private sector rose by 8 cents last month, to $26.92, for a year-over year increase of 71 cents or 2.7 percent. This increase represents a slight improvement over the persistent stagnation in wages in the years following the recession, but annual wage growth has not cracked the 3 percent mark since 2009.
Every spring, the talent acquisition software company iCIMS surveys college graduates in the US to gauge their expectations and ambitions as they prepare to enter the workforce. This year’s survey, which SHRM’s Roy Maurer flagged earlier this week, finds that this year’s graduating class is expecting higher starting salaries than their peers in recent years: On average, they expect to earn $54,010 in their first job, slightly more than the class of 2017 and almost $8,000 more than the class of 2016. Last year’s graduates were a bit unrealistic in their pay expectations, despite a tight labor market, with recruiters reporting starting salaries well below grads’ aspirations.
This year, Maurer notes, employers’ pursestrings are looking a little looser:
“This year’s graduates are confident in their ability to find the job they want after graduation, and a well-paying one at that,” said Susan Vitale, chief marketing officer at iCIMS. … The data revealed that recruiters estimate they will pay entry-level employees $56,532 on average this year—a substantial jump of more than $10,000 since last year, when the estimate was $45,361 on average. “For employers, even with an abundance of educated candidates, nearly 80 percent of recruiters are finding filling entry-level positions more challenging than they did three years ago,” Vitale said. “In response, recruiters have upped their game by offering better salaries and benefits, increasing training and development, and enhancing their employee referral programs.”
Maurer also highlights another survey from Yello, which found that a majority of graduates were putting priority on career advancement in their first job searches. Nearly half of respondents to the Yello survey said they were planning to stay with their first employer for more than three years, in another point of evidence against the myth of the millennial job hopper (though these graduates might properly be classified as members of Generation Z). These findings, Yello CEO and co-founder Jason Weingarten told Maurer, suggest that recruiters should be focusing their value propositions for graduates on opportunities for long-term growth and development. Some employers are already responding to the demand these surveys show for higher salaries and clear career paths, such as Morgan Stanley, which recently raised starting pay and accelerated the promotion path for its junior investment bankers.
Unemployment across the US fell to 3.9 percent last month, its lowest level since December 2000, the latest jobs report from the Bureau of Labor Statistics showed, as the economy added 164,000 jobs. The increase in jobs was below the average monthly gain of 191,000 over the prior 12 months and the median estimate of 193,000 provided by economists to Bloomberg. However, job gains from the previous two months were also revised upward by a net 30,000 jobs. A broader measure of unemployment, including those marginally attached to the labor force or employed part time for economic reasons, fell from 8 percent in March to 7.8 percent in April.
Wage growth remained slow, however, with average hourly earnings rising 4 cents to $26.84, representing a 2.6 percent year-over-year-increase. That figure has dwindled from 2.9 percent in January, dampening hopes that the tight labor market would finally lead to accelerating wage growth for American workers. Nonetheless, Josh Wright, Chief Economist at iCIMS, tells the Washington Post that it’s “an exciting headline for the worker”:
“A real Goldilocks number, with job growth being great.” But pay stayed flat, so the Federal Reserve won’t likely feel pressure to raise rates before June. In other words, Wright said, the markets should respond favorably. “What we’re seeing here is steadiness,” he said. …
If the expansion further gains steam, analysts at the Fed said the unemployment rate could reach 3.7 percent this year, a figure not seen since 1969.
Also, the New York Times points out, “A year-over-year increase of 3 percent in hourly earnings is considered the trip wire that could prompt the Federal Reserve to raise its benchmark interest rate more aggressively than it has signaled”:
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US nonfarm payrolls rose by a seasonally adjusted 103,000 in March, while the more robust numbers from January and February were revised downward by a cumulative 50,000 in Friday’s monthly report from the Bureau of Labor Statistics, representing a marked decline from February, when the workforce grew at the strongest monthly rate since July 2016. The unemployment rate held steady at 4.1 percent for a sixth month, still the lowest since December 2000, while wages rose only slightly, by 8 cents an hour for a year-over-year increase of 2.7 percent.
Labor force participation fell incrementally from 63.0 percent in February to 62.9 percent in March. That’s better than the recent low of 62.3 percent in 2015, but the rate remains nearly the lowest the US has seen since the late 1970s, the Wall Street Journal’s Eric Morath observes. With the economy at approximately full employment, the government and employers alike are hoping to entice more non-working Americans off the sidelines, but have had limited success so far in that endeavor.
Friday’s numbers fell short of expectations. Economists surveyed by the Journal had predicted 178,000 new jobs and an unemployment rate of 4.0 percent. ADP’s independent monthly report, released on Wednesday, said companies had added 241,000 jobs last month. ADP’s numbers always tend to be higher those from the BLS, but this month’s divergence is unusually wide.
One possible factor in March’s sharp decline is the weather: The US was hit with a series of late winter storms this year, and as Washington Post economics correspondent Heather Long noted, there was major snowfall the week the BLS conducted its survey, which may have depressed its count and could mean these figures will be revised upward in future reports.
For Ben Casselman, economics reporter at the New York Times, the big-picture takeaways from the jobs numbers in early 2018 are that wage growth is still slower than economists would tend to expect and would like to see given the tightness of the labor market, and that while labor force participation isn’t falling off due to retirements in an aging workforce, Americans are not returning to the workforce in sufficient numbers to fill the shortages in the labor pool:
In the UK, as in the US, persistent wage stagnation has been a painful long-term consequence of the financial crisis and the Great Recession. A new survey from XpertHR finds that employers there are increasingly optimistic about the raises they will be able to offer this year, predicting an average increase of 2.5 percent, Ashleigh Wight reports at Personnel Today:
A survey of more than 200 private sector employers found that they were more optimistic about the pay increases they plan to offer their staff in 2018 than six months ago, when they expected to offer a 2% pay rise. Of the organisations surveyed, the most common pay award prediction remained at 2%, with 28.9% of employers expecting to offer this level of increase. One in 10 (11.4%) employers forecast a pay increase of 4% or more, while just 5.3% of employers predicted a pay freeze.
In the three months to the end of February, XpertHR found there was a 2.5% median basic pay increase, based on data from 169 pay awards. … XpertHR pay and benefits editor Sheila Attwood said: “It is several years since employers have been so optimistic about prospects for pay rises. If private sector pay awards stick at 2.5% over the course of the year, this will mark the first time since 2012 that increases have been consistently above 2%.”
These findings mirror a survey of US employers conducted in the last quarter of 2017, which registered growing levels of business optimism and predicted that wages could rise 4.27 percent in the coming year, compared to the 3.39 percent figure PwC found in Q3 and just 2 percent a year ago.
Reports issued recently by two leading think tanks paint very different pictures of the economic outlook for UK workers, however. In early November, the Resolution Foundation asserted that the average pay package in Britain in 2022 would still be £20 lower than it was before the financial crisis, according to the Guardian:
The February employment figures from the Bureau of Labor Statistics, released on Friday, depict a strong labor market, with the US economy adding 313,000 jobs: the largest monthly increase since July 2016 and extending the longest recorded labor market expansion in US history into its 89th month. Job growth figures were also revised upward for December and January by a total of 54,000. The unemployment rate held steady for the fifth month straight at 4.1 percent, the lowest rate since December 2000.
Economists had expected growth of around 200,000 jobs. Some observers attribute the spike in hiring to the massive corporate tax cut passed by Congress in December, but this is not a consensus view, the Washington Post reports:
“This is a result of fiscal stimulus — in other words: a $1.3 billion tax cut,” [Glassdoor chief economist Andrew Chamberlain] said. “Businesses are making decisions on a forward-looking basis. Even if the dollars aren’t in the pockets of companies yet, they’re making plans.”
Cathy Barrera, head economist at ZipRecuiter, an employment site, questioned that interpretation, asserting it’s still too early to see an impact from the tax measure. “Really for businesses, what matters is demand for their products,” she said. “If demand for products hasn’t gone up, there’s not more work for these companies to be doing.”
The only piece of not-so-great news in Friday’s jobs report was that February did not deliver the acceleration in wage growth that many economists were hoping for. Average hourly earnings for private nonfarm employees rose by 4 cents to $26.75, for a year-over-year figure of 2.6 percent, lower than the 2.9 percent figure reported for January (revised downward in this month’s report to 2.8 percent).
The combination of large job growth and low wage growth was reassuring news for Wall Street, the New York Times adds, as it points to continued economic expansion but eases fears of runaway inflation: