The latest reading of the Atlanta Fed’s Wage Growth Tracker indicates that wage growth is slowing. It came in at 3.3 percent for April, down from 3.5 percent in March and 3.7 percent in February. This slowing primarily reflects the relatively large decline in the employment of those who typically experience the fastest wage growth: young workers. In February, those aged 16–24 accounted for about 12 percent of employment. By April, that share had dropped to under 10 percent. This change has significant bearing on the Wage Growth Tracker because those aged 16–24 had median wage growth of around 7.8 percent on average over the last year, versus 3.6 percent for all workers. So their decreased share of employment has helped pull overall median wage growth lower (see here for more discussion).
Note that while the tracker reflects the compositional change in who is employed, it didn’t show a spike in wage growth suggested by the average hourly earnings data from the Bureau of Labor Statistics' Payroll Survey. This is because the average hourly earnings data are a snapshot of the average earnings of all workers, hence last year's average will include people who are not employed today (and vice versa). As a result, the spike in average earnings was for an awful reason: a lot of low-wage workers lost their jobs. In contrast, the tracker compares the wages of the fortunate people who were employed both today and a year earlier.
Another wage development to keep an eye on are wage freezes. During the Great Recession, there was a large and persistent increase in the fraction of workers who said their wage was unchanged from a year earlier. We will be examining the Wage Growth Tracker data for evidence of an increased incidence of wage freezes or even wage cuts. The fraction of people reporting no change in their wage has increased from 13.7 percent in February to 14.1 percent in April. In contrast, the cyclical low for this series was 12.7 percent in November of 2019.
The April data also revealed a sharp increase in the number of people who are employed but on unpaid absence from work for "other reasons." As described in this recent macroblog post, these are most likely people whose employers furloughed them. March saw an estimated 1.5 million such workers. In April, that number swelled to 6.2 million. If those people had been counted as unemployed instead of employed, the unemployment rate would have been 18.7 percent in April instead of the official number of 14.7 percent. Going forward, a gauge of the strength of the labor market recovery will be how many of these furloughed workers eventually return to work versus become unemployed—or even leave the labor force. Stay tuned.
John Robertson, a senior policy adviser in the Atlanta Fed's research department