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By Josh boak, Anne d'innocenzio, ap business writers
November 7, 2016
WASHINGTON (AP) — Workers at construction sites, hotels and restaurants have enjoyed solid pay raises in the past 12 months. So have employees of utilities and telecom firms.
Finally, after years of stagnant pay, more American workers are receiving meaningful raises — a trend driven home by the government's October jobs report.
Average hourly pay surged 10 cents an hour last month to an average of $25.92, the government reported Friday. That's 2.8 percent higher than it was a year ago, the sharpest 12-month increase since 2009.
But the average wage increase back in 2009 was misleading, propped up in part because employers were shedding millions of lower-paid staffers in the aftermath of the Great Recession. The job market appears much healthier now, a sign that the plodding seven-year recovery is now providing some critical relief for workers.
"The main reason it took a long time for this to show up is that the recession was so deep," said Stephen Stanley, chief economist at Amherst Pierpont Securities.
Unemployment is a low 4.9 percent. For a sixth straight year, the country is on track to add more than 2 million jobs. After years of such steady job gains, fewer people are seeking work. As a result, many employers have felt compelled to raise pay to attract or keep staff.
Some sectors of the economy are exceeding the national average for pay raises. Hotel and restaurant workers, for example, are earning 4.6 percent more than a year ago. Employees in the information sector — which includes telecommunications and data processing — are taking home 5.2 percent more. Utility jobs are paying 4.2 percent more. Construction wages are up 3.2 percent.
"It's clear that wage growth is accelerating," said Stuart Hoffman, chief economist at PNC Financial Services, who estimates continued gains as employers set their budgets for the start of 2017.
Still, not all categories of employers are handing out big raises. Pay at retailers is up just 1.4 percent this year — just half the increase for the economy as a whole.
The retail industry cut 1,100 jobs during October. But analysts said that was due mostly to hurricanes and other storms that caused stores to close and lay off workers. And retailers tend to be cautious about holiday hiring for what is traditionally the busiest period of shopping. This year, stores may be waiting to see if spending picks up after the tumultuous presidential race, which may have distracted or unnerved some shoppers.
"They're adjusting and waiting to see what happens after the election," said Jack Kleinhenz, chief economist at the National Retail Federation, the nation's largest retail trade group. "The fundamentals are there for the ability to spend. This is such an unusual situation, given it's been polarizing."
A survey by the retail federation revealed caution among consumers because of uncertainty about the election.
From September to October, average hourly wages fell slightly for rank-and-file workers. This suggests that wage gains may be favoring managers instead of, say, cashiers. Some retailers like Wal-Mart, the nation's largest private employer, may be raising pay for some lower-paid salaried workers in anticipation of an overtime rule set to take effect Dec. 1. That rule will require employers to pay overtime to workers who earn under $47,476 a year, a category that includes many store supervisors.
But it's too early to tell for sure, says Mark Girouard, who specializes in labor and employment law in the retail industry at the Minneapolis-based law firm Nilan Johnson Lewis.
"If this continues, then I would say that we are seeing an impact (from the new overtime rule)," Girouard said.
Still, the momentum points to wage growth across the broader economic spectrum because fewer people are searching for work. The vast generation of baby boomers has begun retiring, and the growth of the workforce has slowed.
During the first month of 2010, there were roughly 5.5 unemployed people for each job opening, according to government figures. That figure has since declined to 1.3 people for each job opening, thereby strengthening the bargaining power of workers. At the same time, rising minimum wages have boosted incomes for the lowest-paid workers.
The result is that pay is rising for the bottom 40 percent of earners for the first time since the Great Recession, said Joe Brusuelas, chief economist at the tax and consulting firm RSM.
But Brusuelas notes that geography has also influenced those rising incomes. The gains have largely bypassed workers in rural communities, intensifying a discontent with the economy that has surfaced during a brutal presidential campaign.
"Job and wage gains have been disproportionately clustered in the major metro areas of the United States which is reflective of the political divide around the economy that is likely to be vividly on display during next week's election," Brusuelas said in a research note.
Boak reported from Washington, D'Innocenzio from New York.
Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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