How Does Average Pay Rise Just One Cent in This Market?

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That’s how little hourly earnings for the average U.S. employee rose in February, the smallest increase in about a year and a startling pivot, given how much workers have been in demand. 

Average hourly pay, a measure that includes salaried employees, rose to $31.58 from $31.57 last month following a string of much bigger monthly increases. It rose over 10 cents in all but one of the last 10 months, including 19 cents in January, as busy employers have competed for manpower. That’s translated to a 5.1% increase in the past year—from $30.04 to the $31.58—a jump unheard of in the years leading up to the pandemic. (Unfortunately for workers, that extra buying power has been more than eroded by soaring inflation.) 

Economists absorbing the new data out Friday kicked a few theories around for the surprisingly small increase, including that it could just be a statistical fluke, more noise than a signal of a shift in the leverage workers have had recently over employers. 

One popular explanation, though, was that a sharp uptick in lower-paid leisure and hospitality workers dragged the average down, just like massive layoffs among low-paid workers at the start of the pandemic caused average wages to spike. 

Another consideration: It’s evidence to some economists that we are not in the midst of (as some feared) a dreaded phenomenon called a wage-price spiral, where prices increase, causing workers to demand higher wages, causing businesses to raise prices to cover those wages, leading to a vicious cycle.

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.

Article Sources

  1. Bureau of Labor Statistics. "Employment Situation Report."

  2. Bureau of Labor Statistics. "Average hourly earnings of all employees, total private, seasonally adjusted."

  3. Bureau of Labor Statistics. "Real Earnings Summary."

  4. Peterson Institute for International Economics. "US gained surprising number of jobs in February but wage growth was nearly flat."

  5. Capital Economics. "Employment Report (Feb.)"

  6. BMO Economics. "U.S. Payrolls: Another Gold Medal Month."

  7. Wells Fargo Securities. "February Employment: Not Just Inflation That's Hot."