January Jobs Report: What Wage Growth Means For Recruiters

January Jobs Report: What Wage Growth Means For Recruiters

Emily Smykal

The latest jobs figures from the Bureau of Labor Statistics revealed modest employment gains in January of 151,000. While this was below forecasts, it was enough jobs to push the unemployment rate down slightly to 4.9%. And the labor force participation rate, a useful barometer of the state of the job market, increased slightly to 62.7%. According to these figures at least, the U.S. labor market is slowly but surely returning to pre-financial crisis levels.

But this month most analysts focused on the BLS wage data–specifically, the fact that average hourly wages increased by 12 cents, to $25.39. This is 0.5% higher than December, and 2.5% higher than last January when average wages were $24.76. Twelve cents may not sound like much, but it means wages are now increasing faster than inflation. This gradual trend upward also suggests workers are inching their way up to wages not seen since 2008.

Now, coming on the heels of the holiday hiring surge and amid new year global market turmoil, the January figures may not be the best indicator of where the U.S. labor market is heading this year. But the wage increase was significant, and in this post we’ll explain why that’s important for recruiters.

Who Was Hiring in January?

First let’s review where the job gains occurred in January. Despite the end of the holiday shopping season, retail trade led the way with 58,000 new jobs, followed by food services and drinking places (+47,000). Health care (+37,000), manufacturing (+29,000), and financial activities (18,000) also hired more workers. The sectors with significant job losses included private educational services, transportation and warehousing, and mining.

So do these sectors with increasing payrolls also see rising wages for their workers? Unfortunately for many employees, things don’t quite work that way. Wage gains in the last three months have come primarily in technology, information and finance–sectors that have not led the way in hiring:

sector wage growthBesides the sectors that saw job growth, it’s also important to consider the workers themselves who gained employment last month. Wages differ between industries, but also between workers depending on age and experience (not to mention gender, race, and a slew of other factors). January’s jobs report was significant because it also marked the highest level of employed prime-age workers–those ages 25 to 54–since 2008:

prime age workers change
The State of Wages Among U.S. Workers

Employment gains among prime-age workers is good news for employers worried about the impact of retiring baby boomers. But when it comes to wages, it’s hard to say that these job gains directly correlate to increasing wages. The BLS figure of $25.39 represents the average hourly wages for all employees on private, non-farm payrolls. That includes everyone from entry-level workers to CEOs, across all industries.

That’s a lot of workers, right? So let’s look a little closer. First, it’s important to remember this is the January jobs report. The first month of the year often coincides with cost-of-living increases for many employees. Indeed, the month of January typically sees wage gains every year, averaging 3 cents more than all other months since June 2009:

wage changes in 2016Where else could the 12 cent increase have come from? A limited number of workers got an automatic bump in pay thanks to increases to the minimum wage in 14 states. In California and Massachusetts, for example, minimum wages now start at $10 per hour. These increases have only affected 4.6 million workers so far, which is about 3% of the total workforce. More state-level increases are expected this year, but with a minimum wage so far below the average national wage, it is not enough to significantly increase the overall average pay.

A third factor to consider is how wage gains differ between non-managerial workers and their higher level colleagues. The BLS does not break down wages for managers and CxOs, but we can look at data for non-supervisory workers. Their wages increased by just 6 cents from December to January, reaching $21.33 per hour.

Management wages must have contributed to the remaining 6 cent increase, despite the fact that those employees comprise roughly 15% of the workforce. Again, it’s important to consider the month in question. January wages often include some year-end bonuses for senior level staff, so it is likely these payments helped boost the reported average wage.

Wages as a Recruitment Tool

Why should recruiters care about a small increase in average hourly wages? 12 cents may not be much, but being cognizant of trends is vital to staying ahead of expectations.

The salary you offer job candidates is always a selling point, so it’s important to know how your organization stacks up against competitors, and the national average. Talent acquisition leaders may not have direct control over the wages paid to new employees, but they certainly know those benefits better than most of their colleagues.

So take a good look at the wages you offer employees at all levels. If your company is at par, or above the average, don’t be afraid to promote that benefit within job descriptions and as part of your overall employer brand. But remember, money isn’t the only factor on a candidate’s mind. High salaries alone won’t guarantee you attract the highest quality applicants.

For recruiters who think their organization isn’t offering competitive wages, and therefore missing out on top candidates, you’ll need to make sure your voice is heard on this issue. Developing healthy communication with department heads, and getting a seat at the decision-making table are the first steps towards a productive debate on wages at your company.

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