Wages Bounce Back

After years of little or no raises, some industries are starting to pay more.

America may finally be getting a decent raise. A range of data suggests the demand for labor has risen enough to compel some employers to pay more to retain or hire workers. Although the gains are modest, they should broaden and speed up as unemployment falls further and competition intensifies for quality labor. “Wage growth is slowly accelerating,” says Mark Zandi, chief economist at Moody’s Analytics. “By the end of next year, we should be closing in on 3 percent growth,” compared with the average 2.2 percent pay raise that’s been prevalent throughout most of 2015.

According to data from the U.S. Bureau of Labor Statistics, construction is showing the strongest job growth for the 12 months through October this year, up 3.8 percent, compared with 2 percent across all categories. Professional services—which includes jobs in architecture, computer systems design, and legal services—comes in second with 3.5 percent growth, the data from the BLS show.

That’s good news, because these gains are in industries that pay well: Construction workers made $27.54 an hour in October, based on U.S. Department of Labor data. That’s up 2.6 percent from the year before. Professional and business-services workers earned $30.30 hourly, up 3 percent. For all workers, average hourly earnings came in at $25.20.

A steady drop in the unemployment rate is giving economists confidence that a turn to higher wages may be for real. There are now just 1.5 unemployed job seekers for every opening. That’s down from a high of 6.8 in 2009 and is below the level that prevailed at the end of the last economic expansion, in December 2007. “You’ve got the economic fundamentals that say we should get higher wages,” says Brian Jones, senior U.S. economist at Société Générale in New York, referring to the decline in surplus workers.

This is a welcome turn of events for Federal Reserve Chair Janet Yellen and her colleagues at the Fed as they contemplate whether the economy is strong enough to handle the first interest rate increase since 2006.

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