Americans’ Wages Are Rising, Labor Force Participation Highest Since 2013

Following more than a decade of subpar-to-stagnant growth in the U.S. economy, American workers are finally starting to see a pay raise.

In the fourth-quarter (Q4) 2018, workers’ wages saw the largest gain since Q3 2008, and average hourly earnings have risen by 3% or greater for six consecutive months.

The 3.1% increase reported in the Labor Department (DOL) Employment Cost Index last week marked the first time in more than a decade that wages and salaries broke 3%.

The gain all but ensured moderate rate hikes would remain the path forward.

The Federal Reserve closely watches the Employment Cost Index, which also found compensation costs for civilian workers rose 2.9% for the 12-month period ending December 2018.

Compensation costs for private industry workers increased 3.0% over the year, an already solid compensation costs gain of 2.6% in December 2017.

The Bureau of Labor Statistics (BLS) on Friday released the monthly jobs report, less-commonly known as the Employment Situation. It showed strong wage growth and job creation, both of which largely unaffected by the partial government shutdown.

Secretary of Labor Alexander Acosta said the January 2019 Employment Situation report made them even more “confident the nation’s economy will continue to build on the strength seen in 2018 and the first report of 2019.”

“January’s Job Report demonstrated the strength of the American economy, with 304,000 jobs added as private sector job creation continued to surge despite the partial government shutdown,” Secretary Acosta said in a statement.

“Significant growth in the mining, construction, and transportation and warehousing sectors led the report.”

Construction employment added 52,000 new jobs in January, and 338,000 jobs over the past 12 months. Mining added 7,000 jobs for the month and has added 64,000 jobs over the year, a complete reversal from a negative trend under the previous administration.

While manufacturing added 13,000 new jobs, employment in the sector has expanded by an astonishing 261,000 over the year. Strong job creation in these sectors has now applied sustained upward pressure on wages.

“The labor market has continued its pattern of strong growth with little sign of a slowdown in sight,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We saw significant growth in nearly all industries, with manufacturing adding the most jobs in more than four years.”

On Wednesday, the ADP National Employment Report found U.S. private sector employment rose by 213,000 jobs from December to January, including 35,000 in construction and 33,000 in manufacturing.

“Average hourly earnings rose by 3.2%, marking the sixth straight month in which year over year hourly earnings have been growing at or above 3%,” Secretary Acosta added. “Average weekly earnings rose at an even more robust 3.5%, year over year.”

For 2019, wages have gained by 85 cents, or 3.2%. 

The unemployment rate ticked up 0.1% to 4.0%, though it was in large part the result of roughly 175,000 furloughed federal workers seeking and obtaining employment in the private sector during the shutdown.

Still, the report in January marked the 11th consecutive month that the unemployment rate has been at or below 4.0%, and 100th straight month of positive job creation.

As a result of Americans entering the labor market, the participation rate rose to 63.2%, the highest for the gauge since August 2013.