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Wage Growth - 4/22/14

Even as the nation’s unemployment rate has edged lower, wage growth in America has remained sluggish after nearly 5 full years of economic recovery.  Over the last 12 months, nominal hourly wages are up by a modest 2.1 percent, which works out to about 1 percent when one adjusts for inflation.  As reported in the New York Times, during the second half of the 1990s, when employment fell to as low as 4 percent, competition for workers helped to drive real wages higher. 

Workers at the middle of the wage scale experienced real wage and salary growth of roughly 1.5 percent per year, which may not sound like much but translated into the fastest sustained pace in decades.  Wages for workers at the bottom of the income scale expanded even more quickly – by about 2 percent a year above the rate of inflation.  But it’s been a long time since unemployment was 4 percent. 

The nation’s unemployment rate stands at 6.7 percent.  But there are emerging hints of wage recovery.  For instance, though building construction is still down by 1.8 million jobs from 2007, wages in residential construction are up 5 percent over the past year.  Wages are also expanding more rapidly in Northern California and other geographies associated with above average rates of economic growth.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.