President Trump’s Tax Reform: Wages, Salaries Rose Fastest Pace in 11 Yrs
US private-sector workers received the biggest pay raise in 11 years in Q-1 of this year, a sign that the tight job market is lifting wages.
Friday, the US Labor Department said that its employment cost index shows wages and salaries in the private sector rose 1% between January and March compared with the prior Quarter. That’s the biggest gain since Q-1 of Y 2007, before the Great Recession began.
In the past year, wages for private sector workers rose 2.9%, the healthiest increase since Q-2 of Y 2008.
The unemployment rate is at a 17-year low of 4.1% and employers are hiring vigorously. Many businesses are struggling to find workers and they are offering higher pay as a result.
Still, wages for private sector workers rose at about a 3.5% pace in Y 2007, before the Great Recession hit.
Stronger pay gains could add to inflationary pressure on the US economy. Investors are closely watching for signs that the Fed will raise short-term interest rates more quickly to cool rising prices.
The FOMC meets next week
The Fed policy makers have signaled that it may raise rates 2X more this year, but some believe that if wages or prices accelerate, Fed policymakers may add a 3rd hike or not hike at all.
The employment cost index measures healthcare and other benefits as well as pay. Overall compensation for U.S. workers rose 2.7% in Q-1 from a year earlier. That is also the fastest gainer since Q-3 of Y 2008.
Wages and salaries make up about 70% of total compensation, and benefits comprise the other 30%.
Other measures of pay have also risen, but at a choppier pace. Average hourly pay as measured in the monthly jobs report has increased 2.7% in the past year.
Have a terrific weekend