Demand for Workers Putting Intense Pressure On Wages

January 9, 2017 – Employers added 156,000 jobs last month as the U.S. unemployment rate rose slightly to 4.7 percent, according to the most recent U.S. Bureau of Labor Statistics report. During the month, the number of workers unemployed also increased to 7.5 million. December marked the 75th straight month of job growth in the U.S.

These most recent data comes a month after the unemployment rate fell to its lowest standing in nine years. The latest report also follows the addition of 178,000 jobs added in November.

“While job growth has slowed somewhat, this is likely more due to a shortage of qualified workers rather than a lack of confidence among business leaders,” said Sal Guatieri, a senior economist at BMO Capital Markets.

The unemployment numbers from President Obama’s final full month in office was a huge turnaround from January 2009 when he took office. At that time, the unemployment rate stood at 7.8 percent.

“I can’t imagine a bigger contrast between the economy that President Obama inherited and the economy that President Obama is about to hand off,” said Secretary of Labor Thomas Perez. “The major piece of unfinished business in this recovery is to make sure the wind that’s hit our back results in shared prosperity for everyone, and not just prosperity for a few.”

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Where Job Growth Occurred

Job growth took hold in a number of broad industries. Here’s a look at some of the most important key sectors:

  • Employment in healthcare rose by 43,000 in December, with most of the increase occurring in ambulatory healthcare services (+30,000) and hospitals (+11,000). Healthcare added an average of 35,000 jobs per month in 2016, or more than 400,000, roughly in line with the average monthly gain of 39,000 in 2015.
  • Social assistance added 20,000 jobs in December, reflecting job growth in individual and family services (+21,000). In 2016, social assistance added 92,000 jobs, down from an increase of 162,000 in 2015.
  • Employment in food services and drinking places continued to trend up in December (+30,000). This industry added 247,000 jobs in 2016, fewer than the 359,000 jobs gained in 2015.
  • Employment also continued to trend up in transportation and warehousing during the month (+15,000). Within the industry, employment expanded by 12,000 in couriers and messengers. In 2016, transportation and warehousing added 62,000 jobs, down from a gain of 110,000 jobs in 2015.
  • Employment in financial activities continued on an upward trend in December (+13,000). This is in line with the average monthly gains for the industry over the past two years.
  • In December, employment edged up in manufacturing (+17,000), with a gain of 15,000 in the durable goods component. However, since reaching a recent peak in January last year, manufacturing employment has declined by 63,000.
  • Employment in professional and business services was little changed in December (+15,000), following an increase of 65,000 in November. The industry added 522,000 jobs in 2016.
  • Employment in other major industries, including mining, construction, wholesale trade, retail trade, information, and government, changed little in December.

Many Sectors Looking to Hire

About one in five employers, or 19 percent, anticipate increasing staff levels in the first quarter of 2017, according to the latest ‘Manpower Employment Outlook Survey,’ released today by ManpowerGroup.

Nationally, workforce gains are anticipated in all 13 industry sectors during the first quarter, on the basis of seasonally adjusted figures: leisure & hospitality (+27 percent); wholesale & retail trade (+20 percent); transportation & utilities (+19 percent); professional & business services (+17 percent); financial activities (+16 percent); government (+15 percent); construction (+14 percent); durable goods manufacturing (+14 percent); nondurable goods manufacturing (+14 percent); information (+13 percent); education & health services (+12 percent); other services (+nine percent); and mining (+six percent).

When compared with the final quarter of 2016, nationwide hiring activity is slightly stronger in the financial activities and durable goods manufacturing sectors.

Hiring intentions remain relatively stable across the U.S. for the following industry sectors: construction; education & health services; government; information; nondurable goods manufacturing; mining; other services; professional & business services; and transportation & utilities. Slightly weaker hiring prospects are reported in two national industry sectors for the coming quarter: the leisure & hospitality and wholesale & retail trade sectors.

“This a positive sign for job seekers and the economy at the start of 2017,” said Kip Wright, senior vice president, Manpower North America. But not all skills are created equal. “We continue to see significant differences between industries and employers demanding increasingly specific skills to fill positions. Ensuring people can prosper and businesses can compete depends on developing a U.S. workforce that is prepared for the jobs of today, tomorrow and the future.”

Payrolls Increase

With many states raising their minimum wage, earning are on the rise. According to the Bureau of Labor report, average hourly earnings grew 0.4 percent month-over-month, which was better than the 0.3 percent expected. It was also a significant improvement from the 0.1 percent decline in November. On a year-over-year basis, average hourly earnings climbed by 2.9 percent, which is the fastest pace of growth since June 2009.

“The big surprise, and what we found really reassuring, is the bump up in hourly earnings,” said Beth Ann Bovino, chief U.S. economist at Standard & Poor’s. “We’re starting to see signs that people are going to get more money in their paychecks.”

Wages Hold Steady, Talent Rewarded

However, according to some recent reports, wages are expected to slow in 2017. A forecast just issued by the Hay Group division of Korn Ferry reveals that in the U.S., a three percent salary increase is predicted. Adjusted for the 1.1 percent inflation rate, the real wage increase is 1.9 percent.

According to a survey released by Willis Towers Watsonpay raises for U.S. employees are expected to hold steady at three percent in 2017. The survey also found that employers will continue to reward their best performers with significantly larger pay raises as they look for ways to retain their top talent and strengthen existing pay-for-performance cultures.

“Given the continued low rates of inflation and the ongoing pressure on profit margins, employers remain cautious when it comes to budgeting salary increases,” said Laura Sejen, managing director, rewards, at Willis Towers Watson. “While most companies are feeling little pressure to increase budgets relative to what we’ve seen in recent years, many are starting to question how those budgets are spent and whether their conventional approaches to salary planning are delivering a good return on that three percent investment.”

According to a CareerBuilder study, which polled human resource managers, 70 percent said their companies will have to start paying workers higher wages because the market has become increasingly competitive for the skills and labor needed. The report also found that more than half of employers will raise wages for current employees, while two in five will offer higher starting salaries on job offers in the second half of the year.

Among all employers (hiring managers and HR managers), 39 percent reported they will offer higher starting salaries for new employees over the next six months; 20 percent of all employers plan to increase starting salaries on job offers by five percent or more. More than half (53 percent) of employers plan to increase compensation levels for current employees before year end and, similar to salaries on new job offers, 21 percent said the compensation increase for existing staff will likely be five percent or more.

“Where we’ll likely see a more noteworthy change is in the area of wages,” said Matt Ferguson, chief executive officer of CareerBuilder. “The number of hires made each month continues to lag the number of jobs posted for key functions within organizations, and the majority of employers feel they will now have to pay workers more to attract and retain them because the talent supply is not keeping up with demand.”

Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media

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