Economists Say We Should Expect Wage Increases In 2014
Some good news! You may see more money in your paycheck this year. According to a large majority of leading economists in USA Today survey, wage gains will accelerate in 2014.
The 40 economists were surveyed May 2 through 6 and most agreed that economic and job growth will increase higher the rest of this year despite an economy that stalled in the first quarter.
Since the recovery that started in mid-2009, average wages have increased about two percent annually, but has been basically flat after adjusting for inflation. The modest increases have held back consumer spending, which typically accounts for nearly 70 percent of U.S. economic activity.
On the other hand, the jobless rate has been falling pretty fast– to 6.3 percent from 8.1 percent in August 2012. According to Scott Anderson, chief economist of Bank of the West, as unemployment drops to six percent by year’s end, there will be fewer available workers and employers will be forced to initiate pay hikes.
Average hourly pay increased just 1.9 percent last month from a year ago. But pay for production and supervisory staff actually increased 2.3 percent during that same period. This is a sign, says economist Michael Gapen of Barclays Capital, that wages will rise higher for workers across the board.
Even low-wage workers can expect bigger paychecks, say experts, who believe the Affordable Care Act will make it possible for hourly staffers to cut back on their hours or stop working all together. “Employers,” Dean Baker, co-director of the Center for Economic and Policy Research tells USAT, “will have to pay more to attract a smaller pool of remaining workers.”
So Anderson says to expect average pay raises of close to three percent this year. Robert Mellman of JPMorgan Chase says it will be a lower 2.2 percent.
There is good news for the economy as a whole as well. The wage gains will probably coincide with stronger economic growth. The economists estimate the annual rate of GDP growth will be three percent or more in the current quarter and in the final two quarters of the year. And monthly job gains will average 210,000 in that period, compared to an average of 194,000 in 2013.
Sounds like better days are ahead.