On its face, the latest job report showed annual pay gains weakened for American workers in September even as the unemployment rate slid to a fresh five-decade low. The guts of the report indicate it’s actually their bosses feeling the biggest pinch.
Production and non-supervisory employees, who make up the bulk of workers, saw a slight step down in the pace of hourly earnings growth from September of last year— up 3.5%, according to the Labor Department. Meanwhile, the 12-month gain in total wages, which includes those workers and their supervisors, unexpectedly cooled to 2.9% from 3.2%.
Since non-supervisory employees make up the biggest chunk of the workforce, their wages are what matters more, and they’re pretty steady, according to George Pearkes, a macro strategist at Bespoke Investment Group. Also, supervisor pay tends to be much more volatile, he said, so the trend may not be repeated in future months.
Samuel Coffin, economist at UBS Group AG, sees it differently.
“More generally we’re seeing a slowdown in payrolls, and soon that would show up in wages,” he said. “When you see the overall payrolls figure slipping, somebody’s getting paid less there. It’s not clear that it’s as clean cut as blue collar and white collar. What’s important: On aggregate, it’s slowing.”
The slowdown in total annual pay gains was concentrated in the information, wholesale trade, utilities, and finance industries, where hourly earnings declined in September from the prior month. Surprisingly, manufacturing pay actually ticked up 2 cents, despite the ongoing slowdown on factory floors.
“If weaker job growth were sustained this would weigh on incomes and ultimately consumption, but we do not think this will be the case — the decline was driven in part by an aberrantly large fall in information-sector wages and may also reflect difficulties with seasonal adjustment,” Citigroup economists Andrew Hollenhorst and Veronica Clark wrote.
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