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Worker Pay Increased at Faster Pace in First Quarter

Thursday, 30 April 2015 09:03 AM

Wages and salaries in the U.S. rose at a faster pace in the first quarter, signaling workers are having some success seeking higher pay as the labor market strengthens.

The 0.7 percent advance in pay followed a 0.6 percent increase in the fourth quarter, the Labor Department said Thursday. Private wages, which exclude those government workers, rose 2.8 percent in the last year, the biggest gain since the third quarter of 2008.

The agency’s employment cost index, which also includes benefits, climbed 0.7 percent in the first quarter from the prior three months.

Bigger paychecks have been a missing piece of the labor- market recovery even with job openings at a 14-year high and the jobless rate close to the Federal Reserve’s definition of full employment. The central bankers, who completed a two-day meeting Wednesday, are looking for signs of a pickup in wages and inflation as they weigh when to raise the benchmark interest rate for the first time since 2006.

“There’s some build-up of wage pressures in the pipeline,” Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York, said before the report. “As you start to cross the threshold of full employment on the unemployment rate, then wage pressures become that much more acute.”

Other reports Thursday showed consumer spending quickened in March and applications for unemployment benefits fell last week to the lowest level in 15 years.

The median forecast in a Bloomberg survey of 58 economists called for a 0.6 percent rise in the employment cost gauge, which measures not only the costs of wages and benefits, but also employer-paid taxes such as Social Security and Medicare.

Hourly Earnings

Wages and salaries typically account for about 70 percent of total employment expenses. The ECI data help color the outlook for worker pay after the March employment report showed average hourly earnings rose 2.1 percent from a year earlier, close to the 2 percent average since the start of the expansion.

Because the ECI tracks the same job over time, it removes shifts in the mix of workers across industries, which is a shortcoming of the hourly earnings figures.

Wages of all employees, including government workers, advanced 2.6 percent from the same period in 2014 after climbing at a 2.1 percent year-over-year rate in the fourth quarter.

Private wages also rose 0.7 percent in the first quarter from the previous three months, when they increased 0.5 percent.

Pay for state and local government workers advanced 0.4 percent in the first quarter and was up 1.8 percent from the same period last year.

Benefit Costs

Benefit costs for all workers, which include some bonuses, severance pay, health insurance and paid vacations, climbed 0.6 percent. Compared with the same three months in 2014, benefit expenses were up 2.7 percent.

Employer costs for health benefits increased 2.5 percent in the first quarter from the same period last year.

As of January, employers with 100 or more workers must cover 70 percent of their staffs with health-care insurance, as required under Obamacare. The mandate won’t apply to small businesses until 2016.

Increased employer costs would be a sign that businesses might be starting to feel the effects of a dwindling pool of workers, who are able to demand bigger paychecks.

Job Openings

The number of available positions at U.S. employers climbed to 5.13 million in February, the most since January 2001, Labor Department data showed earlier this month. There are about 1.7 unemployed Americans per opening, matching the lowest level since November 2007.

Polling data shows that it may take more time for employers to feel that pressure. A net 13 percent of managers at small businesses said in March that they plan to boost wages, according to a National Federation of Independent Business survey. That’s down from February, when 14 percent said they’d raise compensation.

Retailers including Wal-Mart Stores Inc., McDonald’s Corp. and Target Corp. already have announced increased pay for minimum-wage employees.

More broadly, wages have disappointed amid an otherwise brightening jobs market. Even after a cooling in March, payrolls probably will average 226,000 this year after a 260,000 monthly average in 2014 that was the best in 15 years, according to a Bloomberg survey conducted April 3-8.

At the same time, the unemployment rate held at 5.5 percent in March, its lowest since May 2008. Joblessness is close to the 5 percent to 5.2 percent range that Fed policy makers have defined as full employment.

“The pace of job gains moderated, and the unemployment rate remained steady,” the Federal Open Market Committee said in a statement Wednesday after its two-day policy meeting. “A range of labor market indicators suggests that underutilization of labor resources was little changed.”

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Wages and salaries in the U.S. rose at a faster pace in the first quarter, signaling workers are having some success seeking higher pay as the labor market strengthens.
worker, pay, economy, wages
Thursday, 30 April 2015 09:03 AM
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