MNI INTERVIEW: Solid Wage Gains For Job Keepers-Atlanta Fed

Median wage growth for people who stayed employed through the Covid-19 pandemic held above 3.5% over the past year even as overall hours worked declined, breaking with patterns seen in the aftermath of the collapse of Lehman Brothers, Atlanta Fed senior policy adviser John Robertson told MNI.

"For the workers who kept their jobs, wage growth is fine," he said in an interview. "Employers haven't frozen hourly rates of pay," like they did during the Great Recession, though weekly take-home pay did decline due to fewer hours worked.

The Atlanta Fed measure of hourly wage growth was hovering at post-crisis highs of 3.7% for the six months prior to the pandemic. It then dipped a tenth or two but has "held up remarkably well," Robertson said.

A new measure of weekly earnings growth for continuously employed workers from the Fed bank revealed evidence of a sharper slowdown during Covid. In August, weekly earnings lagged hourly earnings by seven-tenths on a three-month average annualized basis.

SUPPLY OF JOB SEEKERS MORE BALANCED

This unusual pattern for recession-era wage growth likely reflects businesses' operating at capacity, albeit at reduced capacity subject to Covid restrictions, Robertson said. Another explanation could be the supply of job seekers compared to vacancies was more balanced during Covid than in the Great Recession.

"Compared with the Great Recession, apart from the period during the initial lockdown, total vacancies by firms has scaled back relatively modestly during the pandemic while the number of workers looking for a job has increased by less," Robertson said in a blog post.

Sustained wage growth, along with rising participation and narrowing disparities, are key components of the Fed's recently retuned definition of maximum employment.

The traditional BLS measure of average hourly earnings, showing an outsized 5.3% year-on-year gain through February, has been dominated by compositional effects as lower-wage workers became unemployed or dropped out of the labor force.

The last time wage growth eclipsed 4% in the Atlanta Fed tracker was in 2007 and before that in the late 1990s-early 2000s boom.

A Fed staff estimate of the 12‑month change in the median wage derived from private payroll provider ADP data was 3.2% in January, slower than its pre-pandemic pace.