The September jobs report saw 33,000 jobs lost but wage growth of 2.9% annualized. That’s a bit of a departure from the norm of late, where the economy has seen steady and relatively job growth with anemic wage growth throughout many industries.
During the past three months, the U.S. had added an average of 185,000 new non-farm jobs. Growth in wages has not matched the pace and is still “much weaker than before the Great Recession,” said David Gulley, an economics professor at Bentley University Waltham, Mass.
The reasons for the sluggish growth in compensation are not understood completely but could be attributed to the fact that the labor market is demonstrating a high degree of slack, he said.
“This implies that workers are relatively easy to come by,” said Gulley. “However, there is also a record number of unfilled job openings, which should suggest that wages ought to be picking up as firms offer more attractive pay packages.”
Although many industries and cities have a large number of vacant jobs, many companies could be reluctant to offer “significantly higher pay because worker productivity growth has been lagging,” he said.
The growth in wages is not sufficient and remains modest by historical standards, said Josh Wright, chief economist at iCIMS, a Matawan, N.J.-based recruitment software provider.
Employees have benefitted from inflation also remaining weak, which means the current wages have more purchasing power and the Federal Reserve can “slow walk” its rate hikes, he said.
“The low wage growth has left a lot of economists scratching their heads about why, given how tight the labor market has grown,” Wright said.
Household incomes have “finally” started to rise for the middle class which means it is returning real median income to the level attained around 1999, he said.
“The trickier question is how evenly that income growth has been distributed: high-income households continue to see faster income growth than the rest,” Wright said.
Wage growth for people who are paid per hour or work part-time has been even slower compared to those receiving salaries, said Bill Ravenscroft, a senior vice president at Adecco Staffing based in Jacksonville, Fla. Employees are increasing pressure on companies to reevaluate wages in an effort to attract and retain the best ones.
“One of the most frequent conversations we have with our clients when it comes to recruitment is the need to increase wages,” he said. “Many of our clients who have put off wage increases for hourly earners for several years are having sticker shock at what it will take to get and stay competitive in today’s hiring landscape. We are already seeing many occupations experience wage growth, including truck drivers, manufacturers and high level IT and engineering employees.”
The uptick in demand for employees will give them an upper hand as companies are facing the upcoming holiday season.
“Given the employment situation, we expect wage growth to be far more pervasive and significant in this year’s seasonal hiring cycle compared to last year,” Ravenscroft said. “Companies are offering perks traditionally reserved for newer, start-up companies, like flexible working hours and onsite lunches, in order to attract seasonal workers.”
Projected Employment Figures
The economy should bounce back quickly from the impact of the hurricane season even though it resulted in a temporary slowdown in hiring, Wright said.
“The economy has a lot of momentum and the labor market seems to have built up a real head of steam,” he said.
The last two quarters have been strong and produced nearly twice as much job growth needed to keep the unemployment rate from declining. Economists have questioned the quality of the jobs and whether the workforce is prepared either in terms of skill or location to take advantage of them.
The initial jobless claims data reported an initial spike of about 50,000 in Texas and 14,000 over two weeks in Florida. These claims are still relatively low and remain less than two-thirds of the spike in claims seen in Louisiana and Mississippi in the aftermath of Katrina. The unemployment rate is estimated at 4.4% and the Dallas Fed survey reported a limited length of firm shutdowns, leading the sentiment to be “relatively sanguine about unemployment,” Wright said.
An increase of 0.2% for average hourly earnings will produce a steady 2.5% year-over-year pace, he said.
The figures could vary widely due to the lost of jobs and wages from Hurricane Harvey, Irma and Maria, said Mark Hamrick, senior economic analyst and Washington bureau chief of Bankrate, a New York-based financial content company.
“It’s hard to get one’s arms around so much of all the delays related to the hurricanes,” he said.
The unemployment rate should remain the same as last month and average hourly wages are also stagnant at 2.5%, Hamrick said.
“The number of hours worked may take a hit since some people weren’t working,” he said. “The people who were most affected were the part-time or hourly workers who won’t have their compensation restored and will be lost permanently.”
The good news is that the damage to the economy caused by natural disasters does not impact it in the long term and is typically reversed in the ensuing months and quarters, Hamrick said.
Top Fields for Wages
While wage growth remains lackluster, employees can seek positions in a number of fields in high demand which are paying higher salaries, including: actuaries, banking and finance, computer and information science, data analytics, and certain types of engineers, said Gulley.
Traditional blue collar jobs which also pay higher wages include HVAC technicians, plumbers and other skilled trades.
The median hourly wage is highest in the areas of investment management and oil/gas extraction and transportation, Wright said.
Employment growth in the health care industry over the last few months has been robust, demonstrating the strong demand even as debates over health care policy continue, said Susan Salka, CEO of AMN Healthcare, a San Diego-based health care workforce solutions and staffing company. Employment has risen by 328,000 over the year, according to the U.S. Bureau of Labor Statistics. Healthcare employment grew by almost 41,000 in July, which is among the highest monthly job increases since 1990 while June gained 36,000 jobs.
“The strong demand for healthcare services and workers is due to the aging of our population, which requires greater levels of care,” she said. “It has also been exacerbated by the wave of Baby Boomer retirements among nurses, physicians and allied professionals.”
Randstad North America, an Atlanta-based staffing company, received data from their recruiters to determine the jobs which will be most in demand and analyzed trends such as the number of qualified candidates and available positions, market growth, salary range and employer need for specific skill sets. The top eight fields are the following: engineering, finance and accounting, human resources, information technology, life sciences, manufacturing and logistics, non-clinical healthcare and office and administration.
Sales jobs and technical jobs will always be in demand, said Jim Fowler, founder of Owler, a San Mateo, Calif.-based company which provides listings from over 15 million companies.
“The jobs include software engineers, usability and design,” he said. “Design and usability are indispensable to the tech sector. Software engineers are the building blocks of the tech workforce.”
More of What’s Trending on TheStreet: