Unemployment held steady at 3.9 percent last month, while the US economy added 201,000 jobs, according to the August jobs report from the US Bureau of Labor statistics, released on Friday. The numbers of new jobs created in the previous two months were revised downward, however, by 248,000 to 208,000 for June and from 157,000 to 147,000 fro July—a total downward revision of 50,000.
Average hourly earnings rose by 10 cents to $27.16 in August, for a year-over-year gain of 77 cents or 2.9 percent. These numbers indicate that wage growth in the US may finally be accelerating again after years of stagnation despite a tight labor market, the New York Times reported:
Amy Glaser, a senior vice president at the staffing company Adecco, said she had noticed a significant change in employers’ willingness to increase hourly wages. “Now clients are talking in terms of dollars instead of cents for wage increases,” she said. During the busy holiday season, employees often jump from one business to another for an additional 50 cents an hour, Ms. Glaser said. Companies are trying to head off that exodus, she said, by starting seasonal hiring earlier — in August, instead of September and October — and by offering higher starting pay.
One sour note in Friday’s report, however, was that both the labor force participation rate and the employment-population ratio declined by 0.2 percentage points, to 62.7 percent and 60.3 percent, respectively. These figures suggest “an economy running awfully close to its capacity,” Neil Irwin observes at the Times’ Upshot blog:
Competitive total rewards packages are a key battleground in the scramble for talent today. Yet many organizations still rely on outdated approaches when communicating rewards through the hiring process, focusing too much on compensation while neglecting benefits. This is becoming more difficult as salary budgets continue to stagnate: Recent salary surveys suggest that cash wages in the US are unlikely to grow much faster in the coming year than they have in 2018, despite a strong economy and a tight labor market.
While compensation is consistently a top driver of candidate attraction anywhere in the world, we know that candidates are also attracted to tangible benefits like health insurance and paid leave, as well as intangible benefits like flexible scheduling and remote work options. Even as wage growth falls short of expectations, we have seen major US employers investing more in benefits like paid family and sick leave, health insurance, and education benefits like tuition assistance and help with paying off student loans.
To better understand how employers can use their benefit offerings as talent attractors, Gartner’s Total Rewards team worked with data from our talent market intelligence portal TalentNeuron, looking for a connection between how organizations pitch their benefits in job postings and how quickly they are able to fill posted roles. Organizations that don’t leverage their benefits offerings in this way, we found, may be missing out on an opportunity to meaningfully boost their appeal to candidates.
Despite historically low levels of unemployment and high demand for labor, salary budget surveys for 2018-2019 suggest that US wages will grow on average by just about 3 percent both this year and next year, continuing a trend of lackluster raises despite labor market conditions that theoretically should push earnings higher. The WorldatWork 2018-2019 Salary Budget Survey projects a mean average wage growth of 3.2 percent and a median 0f 3.0 percent next year, little changed from 3.1 percent (mean) and 3.0 percent (median) in 2018.
Employers are continuing to devote a significant share of their salary budgets to variable pay, WorldatWork found, but these budgets also aren’t growing, SHRM’s Stephen Miller observes:
Some 85 percent of U.S. employers gave out performance-based bonuses or other forms of variable incentive pay in 2018, the survey shows, and the amount of variable pay budgeted and paid out, for all employee categories, has been stable for several years. When total rewards professionals were asked about their variable pay budgets for 2019, their responses were virtually unchanged from the amounts budgeted for this year and … for 2017.
Alison Avalos, director of membership and total rewards strategy at WorldatWork, tells Miller that one reason why these budgets aren’t increasing is that employers are increasingly using benefits to attract and retain talent instead of cash rewards, including intangible benefits like professional development opportunities and purpose-driven organizational cultures that align with employees’ personal values.
Similarly, Willis Towers Watson’s 2018 General Industry Salary Budget Survey finds that US professionals can expect raises of 3.1 percent on average next year, compared to 3.0 percent this year. Wage growth has leveled off at around 3 percent per year over the past decade. Their survey also found that star performers would once again see higher increases next year, and registered a slight increase in budgets for discretionary bonuses:
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The latest jobs numbers from the US Labor Department’s Bureau of Labor Statistics paint an encouraging picture of the state of the labor market, with new jobs being created at a steady clip and more people joining the workforce than leaving it. Total nonfarm employment increased by 213,000 last month, while the civilian labor force grew by 601,000, edging labor force participation up to 62.9 percent.
Unemployment increased from 3.8 to 4.0 percent as the number of unemployed persons increased by 499,000 to 6.6 million, but these changes reflected the large numbers of new job seekers, not people being thrown out of work. The bureau also revised its estimates for job growth upward for the previous two months, from 233,000 to 244,000 new jobs in May and from 159,000 to 175,000 in April.
Wage growth remains lower than in previous expansionary periods, with June’s earnings numbers showing a year-over-year increase of just 2.7 percent. Average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.98 last month. Coming after a long period of wage stagnation, these numbers are better than nothing for American workers, but still below economists’ expectations and barely enough to keep pace with inflation.
“Taken at face value,” Neil Irwin interprets at the New York Times, “it’s a sign that the hot job market is succeeding at pulling people off the sidelines and into the work force”:
It’s easy to imagine people who have become disengaged from the work force who, in this tightening job market, are more likely than they were a few years ago to see help wanted signs everywhere, or to have friends and acquaintances urge them to start working.
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.