Here’s a sign that the slow-moving economic recovery may finally be showing up in our bank accounts.
Seventy percent of U.S. companies plan to raise pay by at least 3 percent, on average, this year, according to a survey of more than 500 U.S. chief financial officers conducted in the first three months of the year and released Wednesday by Duke's Fuqua School of Business and CFO Magazine.
The survey is an early sign that businesses are finally seeing less “slack” in the labor market. That means there's a shrinking number of Americans who are so desperate for work that they can't bargain for better pay.
For the first time in a while, a lot of businesses are finding that in order to attract and hold on to employees they need to actually -- gasp! -- pay them more.
“The U.S. is finally entering a new phase in the economic recovery,” John Graham, a finance professor at Fuqua and director of the survey said in a statement. "Given that CFOs expect continued strong employment growth, it is surprising that wage pressures are not even greater.”
Three percent raises, to be sure, don’t sound like all that much. Yet it’s been a long time since wages grew at a faster rate than inflation, which is at about 2 percent.
Look at this chart from the St. Louis Fed. Wage growth in the U.S. fell off a cliff after the economy crashed in 2008. And though the recovery’s been in place for a long time, pay's gone absolutely nowhere, drifting along at around 2 percent per year, roughly matching inflation.
Sadly, wages aren’t expected to rise across all industries. While pay is going up in consulting, tech, manufacturing and health care, wage growth is still expected to be less than 2 percent in retail, media and energy, according to the study.
Companies in those industries haven’t been doing that well financially, Graham notes in this video.
Plus there is still a lot of that slack in the system. Yes, the official unemployment rate is pretty low right now at 5.5 percent. However, another Labor Department unemployment measure, which includes workers who aren't technically "unemployed," like those who are working part-time because they can't find anything better, is way higher at 11 percent.
The chart above means that plenty of companies still have the upper hand when it comes to negotiating pay.
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