The New York Times front page article today — “Gains in Wages Expected to Give Economy a Lift” — details the surprising rise in national wages. The caveat — and doesn’t every statistic lately seem to have a caveat? — is the decrease in hours worked:
Source: NY Times
Excerpt:
“If employment does not begin growing at a healthy pace soon, the wage increases will probably not last, many economists say. Changes in pay often lag other parts of the economy.
The recent wage increases appear to grow out of both the sharp recent increases in the nation’s productivity and the relative strength of the labor market, compared with its condition in the aftermath of other recessions.
With the jobless rate at 6.1 percent last month, compared with a peak of almost 11 percent during the 80’s, companies also have less bargaining power than they had during other periods of slow economic growth. A survey of employers by Watson Wyatt, a consulting firm, found that they plan to pay average salary increases of 3.4 percent next year, up from 3.2 percent this year.”
Source:
Gains in Wages Expected to Give Economy a Lift
By DAVID LEONHARDT and EDMUND L. ANDREWS: October 27, 2003
http://www.nytimes.com/2003/10/27/business/27WAGE.html
Of course employers are paying more. Everybody I know is holding their breath fearing layoffs in spite of pay raises. The possibility of losing overtime is also a factor. Employers are trying to hang on to the people they have since they have lost their loyalty. If you remove the offshore jobs from the mix and look at the unemployed (both collecting and beyond collecting) the labor market no longer looks good. The increased wages and tax cuts aren’t being spent because all of the sudden those who are employed know more than one family who is suffering from unemployment and are afraid to spend the extra money.