Rising Wages Will Spur Growth in 2014: Economists
May 12, 2014
Paul Davidson and Barbara Hansen, USA TODAY
Rising wages will fuel growth in 2014 (file photo)
Tired of getting raises that you can jangle in your pocket? This year may be different.
After stagnating for years, wage gains will accelerate in 2014, a wide majority of leading economists predict in a USA TODAY survey. The bigger paychecks should help fuel a more rapid recovery.
"This is kind of the final piece of the puzzle for the consumer," says Scott Anderson, chief economist of Bank of the West.
The 40 economists, surveyed May 2-6, say economic and job growth will ratchet up the rest of this year despite an economy that stalled in the first quarter.
Average wages have risen about 2% a year since the recovery began in mid-2009, and have been virtually flat after adjusting for inflation. The modest increases have held back consumer spending, which typically accounts for nearly 70% of U.S. economic activity.
But the jobless rate has been falling rapidly, to 6.3% from 8.1% in August 2012. Anderson is among economists who say that as unemployment approaches 6% by year's end, a more limited supply of available workers will force employers to step up pay hikes.
Last month, average hourly earnings were up just 1.9% from a year ago, but pay for production and supervisory employees rose 2.3% -- a sign that wages will drift higher for all types of workers, economist Michael Gapen of Barclays Capital says.
Wage pressures are already building in fields such as technology and construction as employers struggle to find skilled workers, says Stuart Hoffman, chief economist, of the PNC Financial Services Group.
Anderson expects average pay increases of close to 3% this year. Robert Mellman of JPMorgan Chase forecasts more modest advances of about 2.2%.
The wage gains will likely coincide with stronger economic growth. Economists predict the annual rate of GDP growth will be 3% or more the rest of the year, the longest such stretch since 2005.
Original headline: Economists see wages climbing
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