Last week’s January Jobs Report drew a lot of attention for its low hourly wage growth of only 0.1% in January.
Even though employers added a more-than-expected 227,000 workers in January, average hourly earnings rose just 0.1 percent. Forecasters struggled to make sense of why Americans’ pay had barely risen at all. “What happened with wages?” asked economists at Bank of America Merrill Lynch.
It’s possible, of course, that the earnings growth number was a fluke. Economists found numerous reasons to play it down after its release by the U.S. Bureau of Labor Statistics on Feb. 3. For one thing, a lot of the January employment growth was in lower-paying jobs such as retail, leisure, and hospitality, which put a drag on average hourly earnings. For another, wages in the high-paying financial sector fell 1 percent—a rare and unexplained drop that might well be reversed in February. – Bloomberg
Unlike a lot of articles, the Bloomberg one above did note the drop in the hourly wage in the Financial sector.
However, we can dig a little more deeply. The headline numbers discussed are for “All Employees” but the BLS also produces estimates for “Production and Non-Supervisory” employees.
While the average All Employee hourly wage in Financial Services dropped by 1.04%, the figure excluding managers was a rise of 0.12%.
Since Financial Managers are typically not compensated on an hourly basis, this drop probably reflects effects of year-end bonuses, and perhaps the retirement from the payrolls of highly-compensated staff.
There is also the highly unreliable effects of low-sample size, and difficult seasonal adjustement.
Not much should be read into one month’s seasonally adjusted wages, however, if we take the numbers as they stand …
If Financial managers had enjoyed the same average pay move as their subordnates, the headline Total Private hourly wage would have risen by 0.2%, not the reported 0.1%. See chart below.
(Note that total employment and hours worked in each sector are used to calculate the averages)