The Economy

Fed Survey Shows Wages Picking up in U.S.

Wage growth and signs that the oil industry may be emerging from its decline were two of the bright spots in the Fed's latest “Beige Book.”
Matthew HellerApril 14, 2016

U.S. economic activity is continuing to expand, with wages picking up in almost all of the country as the labor market strengthens, the Federal Reserve reported on Wednesday.

The wage growth and signs that the oil industry may be emerging from its decline were two of the bright spots in the Fed’s latest “Beige Book” of anecdotal information from its business contacts around the country.

The Fed found that 11 of its 12 regions reported wage growth in the period between late February and early April, with the strongest wage pressures in areas with labor shortages, such as skilled manufacturing, construction, and information technology. A chemical company in Boston’s district said it was boosting pay by 15% at a facility in the South just to keep trained workers from leaving.

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“This is a move we have been hoping employers would make after a long run of strong labor demand, and the reports here show us that wage growth is finally coming,” Tara Sinclair, chief economist at job site Indeed, told The Wall Street Journal.

Job growth has averaged a strong 225,000 a month since the beginning of 2015, but wages had been slower to rise. “Fed officials are looking to wage growth to spur inflation, which has consistently undershot its 2% target,” the WSJ noted.

San Francisco Fed President John Williams earlier this week said the U.S. economy was doing well and he saw inflation moving back toward 2%.

Fed survey respondents in most districts said economic growth was in the modest to moderate range and they expected growth would remain in that range going forward. “The report’s anecdotes do not read as though the country is on the brink of a sustained slowdown,” said Dana Saporta, an economist at Credit Suisse. “More likely, 2016 will prove to be yet another year in which first-quarter GDP growth is going to look like a downside outlier.”

As far as the beleaguered oil industry, contacts in some districts reported signs that production declines were close to an end, suggesting the sector could start to stabilize after nearly two years of low oil prices.