Pay gains in some of the industries hardest hit by the COVID-19 pandemic are higher than average, reflecting employers' continued struggle to lure workers even as U.S. wage growth appears to be cooling overall.
Leisure and hospitality workers, along with employees of information businesses, recorded annual wage gains of more than 6% in December 2022, according to the latest government data. Average hourly earnings for all employees in the U.S. climbed 4.6% year over year in December to $32.82 per hour, the U.S. Bureau of Labor Statistics reported Jan. 6. Annual growth has slowed since last March, when pay for all employees increased by 5.6%.
The wage picture differs significantly between industries and skill levels, as pay continues to surge for some jobs, particularly lower-skilled, lower-paid positions, and seems to be plateauing for others. This uneven path for worker pay likely clouds the outlook for a potential recession and could frustrate Federal Reserve officials looking for a widespread cooling in wage growth, a sign that the historically tight labor market is returning to balance.
"The wage picture is indeed a bit murky," said Josh Jamner, an investment strategy analyst at ClearBridge Investments. "Wages are stronger at the lower end of the spectrum than higher, reflecting a currently tighter labor market there and layoffs predominantly impacting higher paying jobs in recent months."
Wages in the leisure and hospitality sector averaged $20.64 per hour in December last year, up 6.4% from a year earlier. The gain is above average, even though it is slowing.
The sector, which was ravaged by mandated lockdowns and health fears during the pandemic, had more than 1.5 million job openings in November 2022, about 15% of the total U.S. job openings that month, according to the latest government estimates.
There were 946,000 leisure and hospitality jobs added in 2022, about 21% of the total number of jobs created a year earlier.
Wages in the information sector, which averaged $47.80 per hour in December, and construction, which averaged $35.57, saw year-over-year increases of 6.3% and 5.8%, respectively.
The largest moves in wages appear to be among lower-skilled workers, with a 6.7% jump in wages over 12 months, compared to a 6% increase for high-skilled workers, according to data through November 2022 from the Federal Reserve Bank of Atlanta.
Weakness looms
While wage growth remains hot, there are multiple signs of broad economic slowing, said James Knightley, chief international economist with ING.
The Conference Board's measure of CEO confidence is currently at the weakest level since the Great Recession. The U.S. Institute for Supply Management manufacturing purchasing managers' index, a key indicator of the health of the U.S. economy, is falling.
Knightley said this likely indicates U.S. companies are increasingly turning to defensive strategies: cutting costs, reducing capital expenditures and shrinking the size of their workforces.
"For now, there are more job vacancies than there are Americans available to fill them and wage pressures remain pretty strong, but I suspect that will change over coming quarters," Knightley said.