Which Jobs Are Seeing The Fastest Wage Growth
While it is a well-known fact that most prices are surging, serving as the basis for the “transitory” inflation argument, it has been far more difficult to pinpoint what is really going on with wages as a result of the rapidly transforming fabric of the labor market where the lowest paid workers are dropping out fast thanks to Biden’s generous unemployment benefits, in the process distorting conventional wage metrics such as average hourly wages (as a reminder, prices have to feed through to wages to make inflation permanent).
Which is why a key question for the US labor market as the economy emerges from the pandemic is the outlook on wage growth. To isolate signal from the noise, BofA has introduced a novel dataset on job postings and salaries from Revelio Labs to glean insight. The biggest advantage of this dataset compared to publicly available JOLTS data is that it provides salary information for job openings.
At the aggregate, the data reveals that annual salary of job openings on online job boards fell meaningfully during the pandemic but in the latest few readings salaries are starting to trend higher, with BofA’s industry-weighted annual salary measures stands at $50,150 as of April 2021 compared to a low of around $47,400 during the pandemic.
While the aggregate salary measure is still below pre-Covid levels, data broken out by industry and occupation show significant variation in salary. In industries where persistent chronic labor shortages have been reported during the reopening phase (e.g. construction, real estate, rental & leasing, accommodation & food services and other services), salaries have been quicker to recover on new job postings compared to other industries.
Similarly, wage growth has been the strongest in occupations where there has been the greatest demand during the pandemic. Occupations related to transportation (e.g. drivers) and housing (e.g. realtors, home loan officers, agents) have seen both a surge in new job postings and higher annual salaries compared to pre-pandemic levels.
Drilling down into the average salary of job postings by 2-digit industry North American Industry Classification System (NAICS) codes reveals wide dispersion of wage trends. While almost all sectors saw a drop in average salary on job postings, some sectors have recovered faster than others. In particular, housing-related (e.g. construction, real estate, rental & leasing) and manufacturing sectors, where demand was robust throughout the pandemic, saw less of a dip in salaries during the pandemic and have recovered almost back to prepandemic levels.
Service related industries (e.g. educations services, healthcare & social assistance, and accommodation & food services) have seen stronger wage gains of late as demand has recovered amid the reopening process. Meanwhile, retail trade and professional & business services sectors continue to lag behind.
By occupation, a similar story plays out where we see the greatest wage increase in roles that experienced the highest demand throughout the pandemic. For example, job postings for “drivers”, “agents”, “realtors”, and “mortgage loan officers” surged during the pandemic relative to prepandemic levels and saw the strongest boost in salary in job postings.
Looking ahead, BofA sees good reason for wages to rise further in coming months as the economy reopens. The latest JOLTS data show the job openings rate at an all-time high since the series began in 2000 while labor supply lags behind demand, which will take time to clear. Moreover, wage growth tends to move contemporaneously with a rise in job openings.
These dynamics suggest we should see even stronger wage growth in coming months, solidifying the case that the surge in inflation is anything but transitory.
Tue, 05/18/2021 – 23:05