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Salaries and wages grew by 4 percent in 2021, their greatest yearly gain since 2001, the U.S. labor department reported, as employers competed for scarce workers during the Great Resignation.
Pay is increasing across the economy, from restaurants boosting wages to, or above, $15 an hour and investment banks paying six figures to hire financial newbies fresh out of college.
Wages at U.S. restaurants have grown by 10 percent, according to The Wall Street Journal, with higher wages contributing to McDonald’s restaurants’ average 6-percent menu price increase.
Airplane manufacturers and their suppliers have boosted pay more than 7 percent, the WSJ found.
Businesses’ labor costs rose 1 percent in 2021’s final quarter compared to 1.2 percent in the quarter before, hinting that the labor shortage might be easing and pay stabilizing, the WSJ noted.
The U.S. Federal Reserve, as well as many investors, now consider the labor market to be at, or close to, full employment, with the jobless rate edging under 4 percent.
However, the economy is supporting 16 percent fewer jobs than before the COVID virus arrived, meaning that the labor force itself has shrunk.
TREND FORECAST: The labor market may be stabilizing. If it is, employers will feel less of an urge to raise wages, or at least to raise them less than they have already.
Workers’ pay already lags inflation, even considering 2021’s record wage bump. According to seasonally adjusted data published by the Labor Department, considering the rate of inflation, the average worker got a 2.4 percent pay cut last year.
We forecast this disparity will worsen as employers ease-up on wage hikes while inflation keeps rising.
This in turn will put downward pressure on consumer spending which comprises 70 percent of America’s Gross Domestic Product.