Job listings recently hit a 13-year high, and robust hiring is occurring in many sectors of the economy, yet salaries have increased only slightly.
The basics of supply and demand indicate that salaries will start rising at a faster rate soon unless there is a corresponding loss of jobs in other industries to offset the hiring gains. It may look like that is what is happening, according to reports out of Washington, but the picture is deceiving.
The Economy is Adding Jobs While Unemployment Rises
Seemingly contradictory statistics were released by the Labor Department in August. The report stated that hiring is up in 36 states yet the unemployment rate actually rose in 30 states in July. A total of 209,000 jobs were added during the month as the national unemployment rate ticked up from 6.1 percent to 6.2 percent.
The good news is that the increase in the unemployment rate was not the result of job losses but was driven by more people searching for jobs. A person is not considered unemployed until he or she is looking for a position. The improving economy has motivated many to get back into the hunt for employment.
July’s jobs increase was close to the 2014 average of 219,000 new jobs per month. If that rate continues, it will be the greatest increase in employment since 1999.
Where are the Jobs?
Many of the jobs are being added in sectors with low-to-moderate wages including fast food and retail. However, a good number of opportunities have opened up for professionals. Job listings for professionals reached levels not seen since early 2001, shortly before 9/11 and the hit the economy took from those events. These are the top industries that are adding salaried employees:
- Business services
- Information technology
- Accounting and legal
- Skilled manufacturing
- Health care
When Will Salaries Begin to Rise More Quickly?
If the economy continues its upward trajectory, salaries increasing at a faster rate will follow closely. There is data that suggests this will be the case. According to the Labor Department, job openings are up 17.6 percent in the last year while hiring is up just over 9 percent. One reason for the lag in hiring may be that employers are not offering high enough wages to get employees to quit their current jobs to make the move. Employers will be forced to increase wages to attract the talent they are seeking.
Salaries for professionals in scientific and technical services, natural resources, financial management, manufacturing management and production are already climbing at a significant rate. Wages are up an average of nearly 2 percent for these industries in the second quarter compared with 2013, according to the Labor Department’s Employment Cost Index.
Economists at Kiplinger’s were among those that predicted at the end of last year modest increases for salaried workers in 2014. They were right on the money, and the early rumblings for 2015 are that wages will rise more significantly if the economy continues to grow.