12 Oct Are Wages Growing in the Current Economy?
After the pandemic took a large toll on the United States economy, employees who had previously lost their jobs have made a return to the workforce and employment in the country has made a comeback. Despite the return to work, inflation has become a serious issue and the economy is on the brink of another recession, something that has not happened since 2020 due to the COVID-19 recession. As costs for goods and services continue to rise, American workers are feeling the strain on their wallets. Incomes for workers have stayed stagnant while prices for things like food, gas, and household goods continue to grow at a high rate. The U.S. remains in a tight labor market that is increasingly competitive due to the skills gap, but how does this current economy affect wages and wage growth for today’s workers? In this article, we will cover the current state of the U.S. workforce and how inflation and other market issues have affected income and wage growth for employees and businesses.
IS Our Economy in a Recession?
Many economic experts and politicians have been debating over the last year about whether or not the U.S. is in a recession. The main argument is really about the definition of what an economic recession is. A recession occurs when there are two consecutive quarters of negative Gross Domestic Product (GDP). By this definition, the U.S. entered a recession in the summer of 2022. However, the U.S. Department of Labor and the U.S. Bureau of Labor Statistics, along with other economic experts say that we are not in a recession, but rather that the economy is growing at a slow rate. Despite the inflation, consumers are still spending at a normal rate and businesses are still investing and hiring.
Current State of the U.S. Economy
The current state of United States economy shows signs of growth, but at a very slow rate. The rate of economic growth might be slowed, but the real wage growth, which is not adjusted for inflation, has continued to grow for the vast majority of workers. Even in this current job market, millions of workers are looking at wage growth higher than in previous years. But with international market concerns starting to grow due to Chinese retail trade and European markets, the market in America might see a sharp drop in productivity.
Is Inflation Going to Spark a Recession?
Going into 2023, the Federal Reserve is dedicated to raising interest rates in order to combat the effects of inflation after it reached sky high levels and due to the current employment statistics, employment levels, and strong job reports in a tight job market where the unemployment rate has dropped to its lowest mark in years. The goal of this is to make it harder for consumers to borrow money (credit cards, loans, etc.), therefore making it harder for consumers to spend money. We’ve seen the effects of this already in the real estate market, as the red-hot market has essentially turned to ice. If interest rates continue to rise, a current recession may not be far behind.
Are Wages Growing in this Uncertain Economy?
Businesses are budgeting for employees to receive a labor wage increase of over 4%, much higher than the previous increase of 3.5% during the Great Recession of 2008. In order to keep up with the labor market tightness in the current economy, even large companies like Amazon and Bank of America are having to increase wages in order to attract workers. In today’s uncertain economy, job seekers are focused more on having a livable wage to be able to cover basic expenses than finding a job they actually enjoy. The typical worker is looking for the most desirable income instead of the job they actually want.
The current average wage for the American worker is just over $5,500 per month, whereas low-wage workers average an income of just over $1,700 per month. With businesses planning to see an increase in the Federal minimum wage and inflation causing labor wages to increase, it is safe to say that wages are increasing for the typical worker despite uncertainties in the national economy.
Which Industries are Seeing the Largest Increase in Wages?
Despite the back and forth about the health of the U.S. national economy, here are the industries that are seeing the largest increase in hourly wage growth.
- Business Services
- Medical Services
- Automotive Retail
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