Wage Slowdown Seems to be Reversing

Washington, September 7--For the past two years, millions of American households have been squeezed by a sharp slowdown in wage growth, but the trend shows tentative signs of reversing. The U.S. Labor Department reported Friday in its monthly report on the job market that hourly earnings of nonsupervisory workers -- about four-fifths of the overall work force -- rose to $15.77 in August, up five cents following a six-cent increase the month before. It was the largest back-to-back gain in wages in two years. This broad measure of wages was up 2.3% from a year earlier, smaller than the 4% increases in the late 1990s, but a notable upturn from the 1.6% gain a few months ago. The figures aren't adjusted for inflation. "It looks like we're getting back to healthy growth in wages," said David Resler, an economist with Nomura Securities in New York. "It is a pattern that you would expect to happen [at] this stage of the business cycle. Companies might be moving more aggressively to fill jobs." At HVH Transportation Inc., a Denver trucking company, Bruce Holder said his company is under pressure to increase the pay drivers get for every mile, or 1.6 kilometers, they spend on the road hauling cargo. It is the result of new U.S. regulations relating to driver rest time and of improving demand, which has led to a shortage of drivers. The economy starts picking up and is exceeding the supply of drivers and trucks," said Holder, the company's owner and president. After a two-year wage freeze, he estimates wages went up three to four cents a mile in 2004 and might go up an additional two to three cents a mile next year. Holder said each cent per mile increases a driver's gross revenue by roughly $1,400, though the new regulations limit the increase by limiting driving time. An improvement in wage trends, if sustained, could be an important development for unsteady consumers and a meaningful development for the U.S. presidential election in November. Millions of low- and middle-income households in the U.S. have been squeezed by the slowdown in wage growth in the past few years. This slowdown coincided with an upturn in energy and food prices, sapping real spending power, a factor that has showed up at places like Wal-Mart. Friday's U.S. jobs report also showed the unemployment rate declined slightly in August to 5.4%, its lowest level since October 2001. Payroll employment rose by 144,000 to 131.5 million, a modest gain but one that was still better than the two previous months. Taken together, the report sounded a mildly positive note about an economy that appeared notably weaker during the late spring and summer. Just last week, auto makers and retailers like Wal-Mart reported disappointing August sales, tech bellwether Intel Corp. lowered its projection for third-quarter revenue and consumer confidence was reported lower. Economists said the modest upturn in U.S. job growth and the firming trend in wages cleared the way for Federal Reserve policy makers to raise their target for the federal-funds rate, charged on overnight loans between banks, when they next meet, on Sept. 21. Economists predict the central bankers, eager to lift rates from the crisis levels of 2002 and 2003, will raise the rate to 1.75% at that meeting.