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Wage Pressures - 10/27/14

One of the biggest questions facing the economy in 2015 is whether for the first time in many years we’ll observe large-scale wage pressures in America.  As many know, wages have not expanded rapidly in recent years and most measures of labor compensation from the Bureau of Labor Statistics indicate that wage growth remains stuck at around 2 percent per annum. 

But according to Moody’s Analytics, the view that wages are stagnant is being challenged by newly released data collected by human resource management giant ADP.  These data show a definitive, broad acceleration in wages, at least for workers who have not switched jobs recently.  For workers who have not switched positions over the past year, the hourly wage rate is up 4.5 percent from a year ago.  Pay is up most for younger workers, those working at lower pay scales and for those who work at small companies. 

The largest gains have occurred in financial services and in construction in the American South and on the West Coast.  There are many implications if this pattern of wage growth spreads to other workers, industries and geographies over the next year, including for retailers and for Federal Reserve policymakers, who may need to begin to normalize monetary policy sooner rather than later.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.