SAN FRANCISCO (Reuters) - U.S. wages are on the rise at a pace that is probably faster than the topline data suggest, according to a leading labor economist at the U.S. central bank.
Officials at the Federal Reserve and other economists have publicly puzzled over sluggish wage growth despite a 16-year low unemployment rate. Some observers have speculated that the lack of faster pay rises may be holding down inflation and keeping Americans from benefiting as much as they should from a moderately expanding economy and some Fed policymakers have said that slow-growing wages make them wary about pressing on too quickly with interest-rate hikes.
In a blog post Monday titled “The good news on wage growth,” San Francisco Federal Reserve Bank’s research chief Mary Daly and Arizona State University economics professor Bart Hobijn noted that workers who are newly entering or returning to full-time employment usually earn less than the typical full-time employee.
“This means that strong job growth can pull average wages in the economy down and slow the pace of wage growth,” Daly and Hobijn wrote.
Weekly earnings rose at an annualized 4.2 percent pace in July, a government report showed earlier this month, the fastest pace since before the 2007-2009 financial crisis. That is an improvement but “the underlying story about wage growth may be even better than the headline number suggests,” they wrote.
Daly and Hobijn argued Monday that wage growth is already taking hold, particularly for workers who are continuously employed. Overall wage growth is held back, they argued, as previously unemployed or underemployed workers start full-time jobs, and as highly paid baby boomers retire.
But recent data suggest that those effects may be waning, potentially signaling stronger wage growth ahead, they wrote.
Reporting by Ann Saphir; editing by Diane Craft