This surprised economists.
Income growth usually slows down sharply when unemployment is high, which is the case in the last 14 months. Many economists believed it would happen this time around as well. Instead, paychecks seem to have weathered the huge shock of the pandemic: wage growth fluctuated or fell at first, but has been steadily increasing for months now.
“These aren’t necessarily gangbusters, but it’s just higher than you might think” when so many Americans are out of work, said John Robertson, an economist who heads the widely used wage growth monitor. the Federal Reserve Bank of Atlanta. The payroll is still down by 8.2 million jobs, although that number could drop when new data is released on Friday.
Even less educated workers, who have suffered the worst job losses and still face high unemployment rates, have saw wages accelerate this year as economies reopen and employers struggle to hire. That’s according to the Atlanta Fed’s gauge, which is calculated in a way that makes it less sensitive to at least some of the compositional issues plaguing other wage measures. A quarterly measure separate from the whole compensation costs also held out.
The data, while messy, is anecdotal. Reports of labor shortages in recently reopening service jobs abound, and surveys show that businesses and consumers are increasingly confident in increasing employee incomes. Job vacancies have mushroomed and the pace at which workers are quitting suggests they have some leeway.
Many employers, especially in the hospitality industry, have criticized generous unemployment benefits – now set at an additional $ 300 per week – for encouraging workers to stay home and making it harder to hire. More than 20 states, all led by Republican governors, have decided to cut pandemic unemployment programs before their scheduled end date in September.
Republicans have warned that when employers raise wages to attract scarce workers, they may be forced to quit or pass on additional labor costs in the form of higher prices. This could turn an ongoing spike in inflation as the economy reopens into one that lasts longer.
But Democrats and many in the Fed believe the risk of a persistent and rapid acceleration in prices is lower, and many see the apparent increase in wages and benefits as a long-awaited opportunity.