There may be good economic news out there that the Obama administration is not trumpeting, because the Federal Reserve Board hasn't discovered an apparent uptick in wages that could signal the "slack" in the U.S. economy has been about all picked up.
This contrary view of the economic rebound was presented by Principal Financial Group, which gathered data from its own clients — mostly small-to-mid-sized companies. What it found was that the average wage growth of its survey group jumped from 1 percent to 3 percent in the 2013-2014 period. The Fed had pegged growth during that time at less than 2 percent.
It's all about interest rates, of course, which the Fed has been holding down for years, unwilling to declare that the economy has improved sufficiently to raise rates.
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Nonsense, says Principal. Employment is up, and, at least among its survey subset, wages are growing at a rate that would warrant a rate increase.
"Evidence gathered from retirement-plan clients of the Principal Financial Group points toward an uptick in wages, particularly among middle-class earners. If this proves itself on a broader scale, there are significant potential impacts to the investment landscape," Principal said in a report.
"While we have seen positive wage growth exceeding annual wage growth from government surveys, the percent change in annual salaries for the latest data [gathered by Principal] jumped, from around 1 percent to 3 percent. When combined with the related findings on new participants, this suggests that our employer clients are bringing on new workers and offering higher salaries to attract talent."
Yes, it's the battle for top talent that's driving this trend, Principal's report sai. Employers are being forced to pay more to land top performers — and that may be the trend the Fed is missing.
"This is wage growth…and significantly higher than what hourly wages and annual earnings growth for the broader U.S. workforce would suggest. So, the Fed's debate about economic slack should be almost over. With little or no slack left, constraints may start to rise as the economy grows."
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
