Wages in U.S. Tempered by Calendar Quirk, Employment Composition

  • Hourly earnings decline for first time since end of 2014
  • BLS says weakness tied to job gains in low-paying industries

The reaction to the February jobs report unfolded like so many before: solid job gains, but where’s the wage growth?

Some economists were prepared for the disappointing print on average hourly earnings, which fell 0.1 percent from a month earlier, chalking the decline up to the what they say is a calendar quirk. They note that worker pay often appears softer during months when the week that businesses are surveyed doesn’t include the 15th -- a payday for many workers.

“Nine times out of 10, when the 15th falls outside the payrolls survey week, hourly earnings get under-reported,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd., whose forecast for no wage growth last month was among the lowest in the Bloomberg survey.

Businesses that reply to the Bureau of Labor Statistics’ survey are supposed to tell the agency about payments made to their workers during the pay period, even if it falls outside the survey week, like the 15th did last month, he said.

“But clearly they don’t,” Shepherdson said. “And the BLS doesn’t adjust for the fact that people don’t report accurately.”

While the BLS has not done tests on this pattern specifically, they have looked into a similar theory before, said Brittney Forbes, an economist for the agency in Washington. The group’s survey week includes the 12th of the month, and they’ve checked whether earnings are depressed when that date falls on a Friday or Saturday, she said.

“We haven’t found anything statistically significant that affects earnings in that way,” she said. The BLS will “continue to research and look into” other possible biases in the data, she said.

Employment Composition

Forbes said another explanation for the earnings drop lies in the composition of employment growth for last month. Employment grew in lower-paid industries, including retail and leisure and hospitality. At the same time, payrolls in higher-income sectors such as mining and logging declined.

“As far as last month, those employment changes were bringing earnings down,” Forbes said.

A significant and consistent pickup in wage growth has yet to materialize during this recovery, though there had been nascent signs that could be changing. Average hourly earnings climbed by 2.6 percent in December from the year before, matching the most since 2009, and 2.5 percent in January.

March may not offer any conciliatory rebound, as the 15th again falls outside the survey week. A flat reading for the month would lower the year-over-year pace to 1.9 percent, according to Ted Wieseman, an economist at Morgan Stanley in New York.

“We wouldn’t view that as a change in trend, but it should eliminate any thought that there’s been any acceleration to this point from the 0.2 percent monthly trend that’s been in place since 2010,” he wrote in a note to clients.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE