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U.S. Wage Acceleration Looks Real, at Least in Certain Sectors

U.S. Wage Acceleration Looks Real, at Least in Certain Sectors

(Bloomberg) -- Wages in the U.S. increased 2.9 percent last month from a year earlier, marking the strongest advance of the expansion so far. And despite some caveats, the pickup looks like it might be durable -- at least in certain key sectors of the economy.

There were two things to consider when looking at the figure. For starters, the Bureau of Labor Statistics publishes two main series on average hourly earnings -- one for all private-sector nonfarm employees, and the other for only production and nonsupervisory workers. The former registered a big acceleration in wages, while the latter didn’t. Second, average weekly hours worked for all employees slumped, which could have artificially boosted the hourly earnings figure for that series.

In the sectors of the economy that were the biggest drivers of the overall wage growth acceleration from December to January, however, neither seems to have been a big issue.

The largest contributors to the pickup in the all-employees earnings metric were the professional and business services sector, education and health services, and financial activities.

U.S. Wage Acceleration Looks Real, at Least in Certain Sectors

The professional and business services sector includes everything from highly-skilled technical workers like computer scientists to low-earning temporary workers. Wage growth for the entire sector hasn’t accelerated much since 2014 but is starting to push toward the high end of the range. Hours worked were down a bit from a year earlier, but not much. Earnings did pick up a bit more for all employees than they did for just production and nonsupervisory workers, so the jury is still out on whether this acceleration will last.

U.S. Wage Acceleration Looks Real, at Least in Certain Sectors

The education and health services sector, which contributed about as much to the overall increase in wages as business services -- is where the pickup really looks legitimate. Health care and social assistance represent about 84 percent of employment in this classification.

Hourly earnings accelerated for both categories -- all employees and nonsupervisory workers -- with the former clocking the biggest advance in nearly six years. Hours worked were also up.

U.S. Wage Acceleration Looks Real, at Least in Certain Sectors

The third major contributor to the overall earnings boost in January was the financial activities sector. Of the three, this one shows the biggest disparity between wage growth for all employees and that for just production and nonsupervisory workers. The former accelerated to 4.2 percent from 3.8 percent, while the latter actually decelerated, to 1.6 percent from 1.9 percent.

U.S. Wage Acceleration Looks Real, at Least in Certain Sectors

When the Bureau of Labor Statistics releases more detailed wage data for January in next month’s report, it will help answer questions such as what drove the wage increase in the professional and business services sector: was it high-skill industries or low-skill ones? Also, what’s going on in health care? And what accounts for the widening pay gap in financial activities?

Until then, stay tuned. For now, there are at least tentative signs that the acceleration in wage growth may be for real.

To contact the reporter on this story: Matthew Boesler in New York at mboesler1@bloomberg.net.

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Vince Golle, Scott Lanman

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