Jan.
As the unemployment rate has fallen in recent months and the economy has roared, one central question has bedeviled the American job market: Where is the wage growth?
New data on Friday suggested an answer: It is here, and it is now.
Average hourly earnings jumped 2.9 percent in January from a year earlier, the Labor Department said on Friday, the latest sign that the long, slow economic recovery is at last reaching Americans’ pocketbooks. Separate data released this week showed that private-sector wages and salaries rose 2.8 percent in the final three months of 2017 compared with a year earlier, the fastest growth since the recession.
“People have been wondering when the wages are going to start to rise,” said Catherine Barrera, chief economist of the online job marketplace ZipRecruiter. “I think that over the first six months of this year, we’re really going to start to see the wages rise.”
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6 Reasons That Pay Has Lagged Behind U.S. Job Growth
Average hourly earnings were 2.9 percent higher in January than a year earlier, a hopeful sign that wages might be gaining traction in a tight labor market. Their stubborn failure to do so is one of the mysteries of a recovery now in its ninth year.
If such predictions are borne out, there could be political ramifications. President Trump hailed his economic record in his State of the Union address on Tuesday, and Republicans are counting on the strong economy to help them in the midterm elections in November. Most economists contend that Mr. Trump deserves relatively little credit for the strong economy, which predates his election and is partly a result of a global rebound outside his control. But voters may not focus on such nuances.
Economists cautioned against reading too much into a single month of data, which is preliminary and will be revised at least twice. Several times in recent years, wage growth has appeared to pick up, only to fall back to earth in subsequent months. And other measures of wage growth haven’t yet shown the same acceleration.
But there is reason to think that pay gains will prove more durable this time around. Job growth has been steady — employers added 200,000 jobs in January, modestly more than in December — and the unemployment rate has fallen to 4.1 percent, a 17-year low. That is forcing companies to compete harder for workers, a recipe for pay increases.
“It’s as tough as it’s ever been,” Michael Mabry, president and chief operating officer of Mooyah Burgers, Fries and Shakes, a 100-restaurant chain based in Texas, said of the current hiring environment.
Mr. Mabry said that in some parts of the country, workers would walk off the job knowing that they could find another restaurant hiring down the street. Still, he said, Mooyah can’t just raise pay across the board — the burger industry is “a pennies business,” Mr. Mabry said, and wage increases quickly eat into profits.
Instead, Mr. Mabry said, he is looking for ways to make restaurants more efficient by reducing turnover, improving morale and cross-training workers for various jobs. The goal, he said, is to be able to pay higher wages to fewer workers.
Mooyah is also trying to recruit untapped sources of talent. The company recently started a program to help franchisees expand their marketing efforts by hiring at-home parents and others who had not been in the labor force. The jobs are meant to appeal to people who might not be looking for traditional work: They do not require being at an office every day or having a traditional schedule. Mr. Mabry said that kind of flexibility made sense when filling full-time slots with experienced workers was harder than ever.
“Why do I have to be pigeonholed into a particular résumé or a particular experience?” Mr. Mabry said of his recruitment approach. “I’m sure there is someone out there who can bring something different to the team. It’s just having an open mind.”
More companies are likely to adopt that kind of flexible approach as the labor market tightens. And there are other signs that companies are rethinking their approach to hiring. They are becoming more willing to consider candidates with criminal records, for example, or to waive educational requirements. The car retailer AutoNation said this week that it was no longer refusing to hire workers who tested positive for marijuana use — a sign of changing legal and societal norms, but also an indication that companies are rethinking hiring practices in a tight labor market.
“People who are marginally employable suddenly become highly employable in a period like this,” said Joseph Brusuelas, chief economist of RSM, a financial consulting firm.
There were some notes of caution in Friday’s report. The total number of hours worked — a measure that combines the number of jobs and the average hours worked on those jobs — fell slightly, a sign that demand for labor might not be as strong as the headline job-growth figures suggest. And the unemployment rate for African-Americans, a figure highlighted by Mr. Trump after it fell to its lowest recorded level in December, jumped nearly a full percentage point, to 7.7 percent. The unemployment rate for white Americans fell to 3.5 percent.
But despite such month-to-month fluctuations, economists say the tightening labor market is paying dividends to groups that were left behind by earlier stages of the recovery. Wages have risen most quickly in lower-paying industries in recent months, and employment gains have gone disproportionately to less-educated workers.
Companies including Walmart, Starbucks and Lowe’s have also announced new benefits for hourly workers, such as paid time off to care for sick relatives and paid parental leave. And the number of Americans working part time because they can’t find full-time work has fallen 15 percent in the past year.
Taken together, the data paint a picture of an economy that is not just creating jobs but that is increasingly creating good ones.
“Employers don’t simply raise wages when the labor market gets tighter; they may also raise the quality of the job to get people to come on board,” Ms. Barrera said.
Mr. Trump and other Republicans argue that the economy will also benefit in coming months from the new tax law. They point to recent announcements from Walmart and other companies, which have cited tax savings in their decisions to raise wages and pay bonuses. (One-time bonuses aren’t included in the hourly wage data released Friday, but will show up in broader measures of income.)
Many economists are skeptical of such claims, regarding them as timely public relations moves. And they question the wisdom of providing fiscal stimulus when unemployment is low and the Federal Reserve is raising interest rates to curb inflation. But they said there were signs that corporate executives had become more confident in the economy since Mr. Trump took office, which could make them more willing to hire workers and raise pay.
“I hear my clients saying the tax bill gave them more confidence in the pro-business economy,” said Tom Gimbel, chief executive of LaSalle Network, a staffing firm. “There’s confidence coming from D.C. that they’re not going to get in the way.”
An earlier version of this article misstated the nature of Grant Thornton’s business. It offers audit, tax and advisory services; it is not an investment firm.