U.S. Wage Gains: Construction versus other Major Industrial Sectors

Article source: CMDGroup

At the end of 2010, the unemployment rate in the United States was 9.3%.

Five years later, as of December 2015, the national jobless figure has been cut nearly in half, to stand at 5.0%.

There’s a common lament being heard that the tightening in U.S. labor markets has been overstated because a large bloc of potential workers has given up hunting for a job.

Furthermore, so the argument goes, whatever employment improvement has happened isn’t yet leading to better wages and salaries and the economy won’t really build up a head of steam until workers are being paid more, so they can spend more.

This Economy at a Glance will look at the percentage changes of year-over-year average hourly earnings for both production and supervisory workers in the private sector as a whole, and for major industrial sectors. Historical data can be readily downloaded from the web site of the Bureau of Labor Statistics (BLS).

In the hopes of finding trend lines, the analysis in this EAAG will be limited to the past five years.

Let’s go straight to the conclusion for the U.S. labor market in its entirety; although, to maintain a modicum of suspense, the construction sector will be saved until later.

Graph 1 shows that year-over-year average hourly earnings for all private sector workers in America have been trending upwards, but ever so gently.

Taking readings off only the dotted trend line, average hourly earnings have shifted from slightly below +2.0% at the beginning of 2011 to +2.2% at the close of 2015. The latter number underestimates the most recent ‘actual’ figure, however, which was +3.0%.

Also, it appears that since July of 2015, the pace of change has accelerated a bit.

One source of drag on nation-wide wage gains, of course, has originated in the ‘mining and logging’ sector (Graph 2). The sharp drop in global prices for many commodities, especially fossil fuels, has curtailed exploration, drilling and extraction activity levels.

The sharpest correction in average hourly earnings in ‘mining and logging’ occurred from early 2014 through the mid-point of last year. They fell from +6.5% into negative territory, -0.4%. Most recently, there has been a return into the +2.0% to +3.0% range.

Graph 3 for manufacturing workers shows a curve with bounce. It headed down throughout 2011 and most of 2012, then more than recovered in 2013. Since January 2014, it has demonstrated another ‘U’ shape. Similar to a number of other sectors, the December 2015 end-point is +2.5%.

Retail sector workers (Graph 4) have been riding a roller coaster. Book-end periods of obvious improvement were spoiled by a downdraft in the middle, from mid-2012 through almost all of 2013. Nevertheless, a reasonable trend line can be fitted to retail’s data points and the slope has a decent incline. (Only three of the graphs have consistent enough shapes to warrant trend lines.)

Staff members in the ‘education and health’ sector (Graph 5) experienced nothing but deterioration in their hourly compensation from the beginning of the time period covered well into 2014. More recently, the pattern has reversed. The number of health care jobs in America is now on a marked upswing and hourly wages have been responding accordingly.

From Graph 6, it is readily apparent that earnings in the ‘leisure and hospitality’ sector languished for a long time after the Great Recession. But they sprang back to life in 2013-2014, topping out at +4.0%, before settling back down into a range of +2.5% to +3.0%.

Finally, we come to construction, documented in Graph 7. For an industry that has notoriously volatile activity levels – i.e., the amplitudes of its cycles are wider than for any other major industrial sector – average hourly earnings have been behaving in a remarkably smooth manner.

A good trend-line fit is clearly evident. The reason the slope is much steeper than for all jobs, though is because the starting point (i.e., the y-axis intercept in econometric terms) is so low. Among the early numbers in the graph, January 2012 was weakest and barely positive, +0.2%.

Average hourly earnings in construction were first on the mend; but then they doggedly persevered and now they have risen above what seems to be the +2.5% benchmark for the economy overall. They may be set to pose more of a financial challenge for employers.

Tags: Alex Carrick, architect, build, CMD, CMDGroup, Construction, Economic, finance, jobs, market, money

Category: CMD Group

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