U.S. firms raising wages; skills gap in goods producing sector: survey

Reuters News
|
Posted: Jan 26, 2015 12:16 AM

By Lucia Mutikani

WASHINGTON (Reuters) - A significant number of American companies plan to raise wages in the next three months, a survey showed on Monday, bolstering expectations of an acceleration in wage growth this year.

The National Association for Business Economics' (NABE) latest quarterly business conditions survey found 51 percent of the 93 economists who participated said their firms expected to increase wages in the first quarter.

That compared to 34 percent in the October survey. Almost a third said their firms had increased wages and salaries in the fourth quarter, up from just 24 percent the prior period. The economists represented a broad spectrum of businesses, including goods-producing, transportation, finance and services.

"It seems as if a number of companies made a decision to kick-up wages at the end of the year. At this stage of the cycle where the unemployment rate has come down, hiring goals continue to improve and now wages are kicking in," said John Silvia, NABE president.

Silvia, who is also chief economist at Wells Fargo, said the latest survey's findings supported the argument for a pickup in wage growth this year.

Tepid wage growth has been a blemish on the labor market, which saw nearly 3 million jobs created in 2014 - the largest annual increase since 1999 - as the unemployment rate fell 1.1 percentage points to a 6-1/2-year low of 5.6 percent.

Many economists say wages will be the key factor in determining when the Federal Reserve will raise its short-term interest rate, which it has kept near zero since December 2008.

The NABE survey found more respondents planned to increase hiring in the first quarter than in the prior quarter. While more than 60 percent of respondents said their firms had no problems filling open positions, 57 percent of those in the goods producing sector reported skills shortages.

That compared to 45 percent in the previous quarter. That created "significant" wage increases in the sector, especially in the construction industry where some firms were paying overtime, bonuses and increasing benefits as incentives.

"More construction companies are finding it difficult to find skilled workers and they feel they have been losing experienced workers to other industries," said Ken Simonson, a NABE analyst and chief economist for the Associated General Contractors of America.

(Reporting by Lucia Mutikani; editing by Andrew Hay)