Inflation is just as hot as the labor market, but the March employment report showed that there aren’t many jobs where wage growth holds up to hot prices.
That is, with a few exceptions, which could hint at a lot about where consumer demand is heading as worries about the pandemic fade.
In a healthy-looking jobs report that showed the economy added 431,000 jobs, the average hourly wage increased to $ 31.73. That’s a 5.6 percent increase in average hourly wages from the same point last year, the Bureau of Labor Statistics said Friday.
Make no mistake, a 5.6% increase is robust.
Indeed, workers have to look back to the early 1980s, aside from the brief moments at the start of the pandemic, to find such large year-over-year increases. Hourly earnings growth was 0.4% from February to March.
However, prices are rising even faster, according to widely followed inflation indicators.
The consumer price index hit 7.9% in February and some economists fear it will rise again in March, numbers that will capture the ripple effects of the Russian invasion of Ukraine.
Another Federal Reserve-favored price indicator, the Personal Consumer Price Index, hit 6.4% in February, according to this week’s data.
Against this backdrop, there are only a handful of sectors where, at least for the March employment report, year-over-year wage growth is keeping pace with inflation:
• In transportation and storage jobs, the year-over-year growth rate in hourly wages was 7.9%. Paying an average hourly rate of $ 27.79, these workers were much needed with the boom in ecommerce sales and supply chains trying to extricate themselves. March jobs for this industry remained “broadly unchanged,” after big gains in February and January, the Bureau of Labor Statistics said.
• In the leisure and hospitality sector, year-over-year growth was even higher at 11.8%. Hotels, restaurants, and bars continued to recruit, accounting for about a quarter of all March job earnings and paying an average of $ 19.68 an hour in March. The sector is still down 1.5 million workers from before the pandemic, according to numbers from the Department of Labor.
Apply the Fed’s preferred measure on inflation, with its 6.4% read in February, and a couple of other points stand out.
• Jobs in the retail trade recorded an average hourly growth of 6.5%, paying an average of $ 22.89 per hour. This industry includes jobs in everything from grocery stores to gas stations, clothing, hardware and more. In March, retail employers hired an additional 49,000 people.
• Jobs in “professional and corporate services” increased 6.6%, paying an average of $ 38.18 per hour. In March, this sector, which covers all types of clerical work, from accountants and lawyers to call centers and administrative staff, added 102,000 jobs.
“Jobs aside, the key number in this report is the modest 0.4% rebound in average hourly wages, which increased by just 0.1% in February. One soft print, out of the blue, is easy to dismiss as noise, but two are harder to ignore; three would be final, so the April issue is now extremely important, “Pantheon Macroeconomics chief economist Ian Shepherdson said in a statement.
In times of high inflation, the concern is that a nasty feedback loop will develop, where high costs push higher wages, leading to even higher prices and higher wages in what is called a “price spiral. wages”.
“Without sustained rapid wage growth, a spike in inflation cannot spiral,” wrote Shepherdson.
The latest report showed strong employment growth, but there are downsides and they won’t be equally supported, according to Dawit Kebede, a senior economist at the Credit Union National Association.
“The continuing increase in wage growth will lead to greater price hikes as companies pass these costs on to consumers. This has an impact on low-wage workers who are already struggling to make ends meet by rising prices for large consumer goods. “
“People are earning more, finding better jobs, and after decades of mistreatment and underpaid, more and more American workers have the real power to get better wages and do what’s best for themselves and
their families, ”President Joe Biden said Friday.
Its Republican critics note that it’s not that simple, hammering on wages that is gnawed at by inflation – and government policies that they say are part of the problem.
Representative. Jim Baird, of Indiana, tweeted“There is little relief for workers as inflation continues to exceed wage rates and as long as Democrats do not adopt fiscally responsible policies, the American people will continue to suffer.”