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The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.


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February 26, 2015


Are Shifts in Industry Composition Holding Back Wage Growth?

The last payroll employment report from the U.S. Bureau of Labor Statistics (BLS) included some relatively good news on wages. Private average hourly earnings rose an estimated 12 cents in January, the largest increase since June 2007. Even so, earnings were up only 2.2 percent over the last year versus average growth of 3.4 percent in 2007.

What accounts for the sluggish growth in average earnings? The average hourly earnings data for all workers is essentially the sum of the average earnings per hour within an industry weighted by that industry's share of employment. In this piece, Ed Lazear argues that a shift of the U.S. economy away from some high-paying industries to lower-paying industries may have contributed to dampened wage growth. Lazear specifically calls out the reduced share of employment in the relatively high-paying finance industry, at hospitals, and in the information sector as potential culprits. A shift in employment away from relatively high-wage jobs will put downward pressure on the growth in average wages.

To get some idea of the effect of industry composition on wages, I took the 2014 calendar year average wage for each industry group at the two-digit NAICS level and multiplied it by the share of employment in that industry in 2014 (admittedly, two-digit NAICS level of disaggregation is very coarse and masks a lot of potential shifts in job-types within industries). Summing across the industries gives an estimate of total average private hourly earnings in 2014. I then repeated the exercise, but using the 2007 industry shares of employment instead (see the chart).

Comparison of 2014 Wages: 2014 versus 2007 Industry Shares

Would average wages have been higher if we had the same mix of employment across industries as we had before the recession? The answer seems to be yes, but not much higher. If nothing had changed in the economy's industry employment mix since 2007, then average wages would have been about 12 cents higher.

This translates into a 16.8 percent increase in nominal wages between 2007 and 2014 versus a 16.2 percent increase if the actual industry employment shares where used, because the decline in the shares of employment in the relatively high paying industries Lazear cites has not been very large, and some higher-paying industries have seen growth. Moreover, some industries with below-average wages, such as retail trade, have experienced a decline in their share of employment as well.


February 26, 2015 in Employment, Labor Markets | Permalink

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"A shift of the U.S. economy away from some high-paying industries to lower-paying industries may have contributed to dampened wage growth."

"May have?" Are you kidding? A union manufacturing job (offshored to China) compared to a non-union fast-food job?

So don't just go back to pre-recession 2007, go all the way back to the trade deals under Bill Clinton in 1994 (NAFTA) and 2000 (PNTR) --- when 2000 was the year that the employment-to-population ratio and the labor force participation rate began declining.

Now Obama wants TPP and TTIP as well.

Posted by: Budf Meyers | February 27, 2015 at 10:46 AM

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February 23, 2015


Are Oil Prices "Passing Through"?

In a July 2013 macroblog post, we discussed a couple of questions we had posed to our panel of Southeast businesses to try and gauge how they respond to changes in commodity prices. At the time, we were struck by how differently firms tend to react to commodity price decreases versus increases. When materials costs jumped, respondents said they were likely to pass them on to their customers in the form of price increases. However, when raw materials prices fell, the modal response was to increase profit margins.

Now, what firms say they would do and what the market will allow aren't necessarily the same thing. But since mid-November, oil prices have plummeted by roughly 30 percent. And, as the charts below reveal, our panelists have reported sharply lower unit cost observations and much more favorable margin positions over the past three months...coincidence?



photo of Mike Bryan
By Mike Bryan, vice president and senior economist,
photo of Brent Meyer
Brent Meyer, economist, and
photo of Nicholas Parker
Nicholas Parker, economic policy specialist, all in the Atlanta Fed's research department

February 23, 2015 in Energy, Inflation, Pricing | Permalink

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February 20, 2015


Business as Usual?

Each month, we ask a large panel of firms to compare their current sales with "normal times." In our February survey, the firms in our panel reported their sales were approaching normal. Indeed, on average, larger firms (those with 100 or more employees) tell us sales levels this month were right at normal. But smaller firms, although improving, are still lagging their larger counterparts (see the chart).


These qualitative assessments suggest a continuation of the trend we've seen in our quarterly quantitative data (these data are compiled at the end of each quarter). In December, our panel of firms reported sales levels about 2.7 percent below normal—virtually identical to the Congressional Budget Office's estimate of the output gap. Here, too, our survey data show that on average, sales of the larger firms in our panel were essentially back to normal, but smaller firms were still reporting ample slack (see the chart).


Our next quantitative assessment of slack in U.S. business is due for release on March 20.

photo of Mike Bryan
By Mike Bryan, vice president and senior economist,
photo of Brent Meyer
Brent Meyer, economist, and
photo of Nicholas Parker
Nicholas Parker, economic policy specialist, all in the Atlanta Fed's research department

February 20, 2015 in Business Inflation Expectations, GDP, Small Business | Permalink

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February 17, 2015


What's (Not) Up with Wage Growth?

In recent months, there's been plenty of discussion of the surprisingly sluggish growth in hourly wages. It certainly has the attention of our boss, Atlanta Fed President Dennis Lockhart, who in a speech on February 6 noted that

The behavior of wages and prices, in contrast, remains less encouraging, and, frankly, somewhat puzzling in light of recent growth and jobs numbers.

So what's up—or not up—with wage growth? Using samples of matched worker-level wage data from the U.S. Bureau of Labor Statistics' Current Population Survey, chart 1 plots the annual time series of median 12-month growth rates in per-hour wages. Like most wage growth measures, this chart indicates that wage growth has been gradually increasing since the end of the recession, but growth remains quite a bit lower than before the recession began. Prior to the recession, the median growth rate of wages was around 4 percent a year. This growth rate declined to 1.7 percent in 2010 (as the incidence of wage freezes become much more prevalent, as shown in this research) and increased to 2.5 percent in 2014. For comparison, the chart also shows the annual growth in the Employment Cost Index's measure of wages. The trends in the two measures are broadly similar.

150217a

A previous macroblog post discussed details about the method of constructing the median wage growth data.

It's well known that wage growth varies across job characteristics such as occupation, industry, and hours worked as well as across worker characteristics such as education and age. For example, younger workers tend to experience higher hourly wage growth than older workers (even though their hourly wage tends to be lower), and part-time workers tend to have lower wage growth than full-time workers. We thought it might be interesting to look at wage growth for various job and worker characteristics. Are there any bright spots where the median growth in wages has approached prerecession levels?

The answer seems to be no, at least not for the set of characteristics we examined.

The following charts plot the annual time series of the median 12-month growth rate in the wages of workers with a given characteristic (occupation, age, etc.). Chart 2 depicts workers across three broad occupation groups: general-services jobs, production-oriented occupations discussed in our last macroblog post, and a category encompassing managerial, professional, and technical occupations (labeled “professional” in the chart).

150217b

Chart 3 shows the median year-over-year wage growth of workers employed in goods-producing versus service-producing industries.

150217c

Chart 4 shows the median growth in the wages of individuals working full-time versus those working part-time.

150217d

Chart 5 shows the median wage growth of workers with less than an associate degree and those with at least an associate degree.

150217e

Chart 6 shows the median growth in the wages of individuals between 16 and 35 years of age, those 36 to 55 years of age, and those over 55 years of age.

150217f

We can sum up our findings by saying that median wage growth is higher for some characteristics than others, and the recent trend in wage growth is generally positive across characteristics. But none of the characteristic-specific median growth rates we looked at are close to returning to prerecession levels. Lower-than-normal wage growth appears to be a very widespread feature of the labor market since the end of the recession.

February 17, 2015 in Employment, Labor Markets, Wage Growth | Permalink

Comments

I think it is a mistake to look for the pattern only in the relatively recent data. Wages have been falling relative to productivity since about 1970- http://politicsthatwork.com/graphs/wages-as-a-percentage-of-productivity

Posted by: politics that work | February 18, 2015 at 11:09 AM

Why should expected annual "wage growth" continue at all in the new normal of No-Real-Growth?

Posted by: Kreditanstalt | February 18, 2015 at 12:09 PM

These charts are terrific ... can you describe the process by which one may be able to update them?

I think you mention having used 'samples of matched worker-level wage data from the CPS.'

Thank you

Posted by: TM | May 05, 2015 at 10:04 AM

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February 12, 2015


Are We Becoming a Part-Time Economy?

Compared with 2007, the U.S. labor market now has about 2.5 million more people working part-time and about 2.2 million fewer people working full-time. In this sense, U.S. businesses are more reliant on part-time workers now than in the past.

But that doesn't necessarily imply we are moving toward a permanently higher share of the workforce engaged in part-time employment. As our colleague Julie Hotchkiss pointed out, almost all jobs created on net from 2010 to 2014 have been full-time. As a result, from 2009 to 2014, the part-time share of employment has declined from 21 percent to 19 percent and is about halfway back to its prerecession level.

But the decline in part-time utilization is not uniform across industries and occupations. In particular, the decline is much slower for occupations that tend to have an above-average share of people working part-time. This portion of the workforce includes general-service jobs such as food preparation, office and administrative support, janitorial services, personal care services, and sales.

The following chart compares the share of part-time employment for these general-service occupations with the share for production-type occupations (such as machine operators, fabricators, construction workers, and truck drivers).

Part-time-share-of-employment

The above chart suggests that if you talk to retailers or restaurateurs, they will say that they always relied pretty heavily on part-time workers. Their utilization increased during the recession, and it really hasn't changed much since then. But manufacturers or construction firms are more likely to say that part-time work is not that common, and although they did increase their utilization of part-time workers during the recession by quite a lot, things have been gradually returning to normal.

Why is the part-time share of employment declining more slowly in general-service occupations? The economy has been generating full-time general-service jobs at a much slower pace than in the past. Of the approximately 7.6 million full-time jobs created between 2010 and 2014, only about 17 percent have been in general-service occupations, versus about 32 percent of the 7.8 million full-time jobs created between 2003 and 2007. At the current rate of full-time job creation in general-service occupations, it would take more than 10 years for the part-time share of employment in general-service occupations to return to its prerecession average.

From the workers' perspective, a relevant question is whether these part-time utilization rates are desirable. Some people work part-time and do not currently want or are not available for full-time work (so-called part-time for noneconomic reasons, PTNER). Others are available and want full-time work but are working part-time because of slack business conditions or the unavailability of full-time jobs (so-called part-time for economic reasons, PTER). The following chart shows the share of employment in the general-service and production occupation groupings that is PTER and PTNER.

Productions-and-general-service

The chart indicates that most of the movement in the part-time share of employment is coming from people who want full-time work. In both cases, the share of involuntary part-time employment rose during the recession, but for general-service occupations it has been more persistent than for production jobs.

Why has the demand for full-time workers in general-service occupations been more subdued than for other jobs? As the following chart shows, wage growth for these occupations has been quite weak in the past few years, suggesting that employers have not been experiencing much tightness in the supply of workers to fill vacancies for these occupations. Presumably, then, the firms generally find it acceptable to have a greater share of part-time workers than in the past.

Year-over-year-median

The overall share of the workforce employed in part-time jobs is declining and is likely to continue to decline. But the decline is not uniform across industries and occupations. Working part-time has become much more likely in general-service occupations than in the past—and a greater share of those workers are not happy about it.

Photo of John RobertsonBy John Robertson, vice president and senior economist, and



Photo of Ellie TerryEllie Terry, an economic policy analysis specialist, both of the Atlanta Fed's research department

 

February 12, 2015 in Economic conditions, Employment | Permalink

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First, most people who work part-time want to work part-time, 20.5 million vs. 6.8 million or about 75%. What you are missing is the effect of the aging baby boomers. The permanent increase in part-time workers is in the 55+ age group who aren't ready to retire but don't want to work full-time.

Looking back at this 55+ group, in 1/2008 they = 5.7 million, in 1/2010 = 6.4 million and in 1/2015 = 7.1 million.

By comparison, the number of young people working part-time stayed remarkably stable: 1/08 = 8.1 million, 1/10 = 8.2 million and 1/15 = 8.3 million.

For those of prime working age, i.e. 25-54, 1/08 = 11.5 million, 1/10 = 13.4 million and 1/15 = 12.3 million. So this group had part-time employment rise during the downturn and is coming down during the recovery.

Bottom line: To the extent that voluntary part-time employment is increasing, it is primarily the aging baby boomers.

Posted by: Karl | February 14, 2015 at 12:56 PM

This is a trend more common with Millennials and there is a huge increase in part time and weekend jobs in sites like http://myweekendjobs.com, not just in the traditions jobs but also wide spreading in all the fields .. especially with the growing technology, a lot of remote jobs where you can work anytime from any where temporary or permanent ...

Posted by: Iam Ayya | April 22, 2016 at 10:57 PM

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