US wage growth hits 9-year high, but what’s driving it?
The uptick in hourly earnings reflects trends in corporate administration, not gains for factory workers, oilfield workers, truck drivers, hospital orderlies, or retail clerks
Average US hourly earnings growth beat estimates for August, rising 0.4%, helping the yearly rate climb to 2.9%, the highest rate since 2009.
It’s clear that the bulk of employment growth during the past six months has come from two sectors: Education and Health Services, and Professional and Business Services, as shown in the chart below.
Manufacturing employment growth has faded during the past several months. The education/health category is mainly health. Professional and Business Services is a catch-all that includes temp agencies, consultants, outsourcing specialists and so forth. It suggests a growth in corporate administration.
The change in hourly earnings is also quite differentiated, ranging from 2% to 4% year-on-year depending on the sector.
Retail shows the highest increase, coming from a low base (US$15.51/hour in January 2018 to US$15.91 in August). But professional and business services also have shown a substantial increase:
The difference is that workers in the professional and business service category earn more than twice what retail workers earn.
To sum up: We know that the two biggest contributors to employment increase are professional services and health services. We also know that health service pay is lagging the average (up only 2.5% year on year) while professional and business services earnings growth is above average.
The increase in average hourly earnings year to date reflects the hiring requirements of corporate administration, rather than factory workers, oilfield workers, truck drivers, hospital orderlies, or retail clerks.