Thursday, March 05, 2015

Hints of real Wage Increases

by Bill McBride on 3/05/2015 03:04:00 PM

A few thoughts ... it seems this might be the year that we see an increase in real wages. Here are a few signs:

1) The official data suggests we are getting closer to full employment. The unemployment rate (U-3) has fallen to 5.7%, and "quits" are up significantly (voluntary separations).  The number of people working part time for economic reasons is still high, but declining (these workers are included in the alternate measure of underemployment, U-6, that has fallen to 11.3% from a high of 17.1%).

2) Several companies have announced increases for their lowest paid employees, including Wal-Mart (to $9 per hour in April, and $10 per hour next year) and T.J. Maxx.

3) More labor issues. There was the West Coast port slowdown (now resolved, with a huge backup of ships waiting to unload), and the ongoing refinery strikes. From the WSJ: U.S. Refiners, Striking Workers Digging In for Protracted Battle

U.S. refiners and striking union workers are digging in for a protracted battle that could last through the spring.
...
Weeks of negotiations the union and refinery owners fell apart in early February. Since then, 6,500 USW workers have walked out of more than a dozen plants. ...

The last nationwide refinery strike was in 1980 and lasted for three months. This year, energy companies have signaled that they are willing for the work stoppage to drag on even longer. The two sides are trying to hammer out a new three-year contract that would be used as a pattern for union employment, wage increases and benefits at refineries and petrochemical plants around the U.S.
Click on graph for larger image.

Union membership has declined significantly over the last 35 years (less power for labor), but these slowdowns and strikes still suggest some negotiating power for labor (we didn't see many strikes in 2008 when the economy was collapsing).

Last year I wrote that the economic word of the year for 2015 might be "wages", "Just being hopeful", I wrote, "maybe 2015 will be the year that real wages start to increase". All of the above suggests some increase in real wages this year.