While overall job growth is on a upward trend, economists question how variations in this growth among and within industry segments impacts wage growth. Over the majority of the past two years, job growth in the United States has averaged over 200,000 new jobs per month. However, during the same period, hourly wages grew much slower at only about 4 percent in total. And this wage growth rate was exactly the same as the change in prices for the same period, which means that real average hourly wage did not increase.
While many economists broadly interpret this as a sign that wage growth is stationary, the reality is quite different. The diversity of job creation at different wage levels paints a different picture.
Wage Growth Across Industries
Between the period from July 2012 to July 2014, the sectors contributing the largest number of jobs were a mix between those that pay a higher wage on average (business and professional services and construction) and those that pay a lower wage on average (retail and leisure and hospitality). In some sectors, such as information workers and financial workers, wages grew faster than average, while in other sectors, such as utilities, wage growth was below average.
Employment and Hourly Wage by Sector
Wage Growth Across States
National aggregate numbers also mask another important source of variation – location. States have different average hourly wages, ranging from a low of $19.34 in Mississippi to a high of $29.01 in Massachusetts. Thus, the national average wage depends to some degree on where new jobs are being created. Additionally, the states vary widely in the distribution of jobs across industries. For instance, 15.2 percent of total Massachusetts nonfarm employment is in professional and businesses services, which has a higher wage growth than average. In Mississippi, this sector makes up 8.9 percent of employment.
Total Private Employment Growth vs. Wage Growth, by State
Source: Deloitte University Press
Comparing total private employment growth to wage growth by state, it appears that several states are actually experiencing a wage decline. But in reality, while this is true with regard to these states’ average wages, the situation is likely a reflection of faster growth in some low-wage industries or in lower-wage occupations within an industry.
Looking at Professional and Business Services
The professional and business services sector, which contributes substantially towards the employment of temporary workers, has experienced large job growth over the period from July 2012 to July 2014. And jobs in professional and business services tend to pay higher-than-average wages.
The industry has been a major job creator since the beginning of the economic recovery in 2009. Currently, this sector employs 1.2 million more people than it did when the recession started in December 2007.
Since professional and business services is an industry which provides services to other businesses, its health depends largely on the health of the businesses it serves. The industry has benefited from the turnaround in the U.S. economy. Additionally, the long-term trend of outsourcing non-core functions to professional and businesses services has played a large part towards the industry’s growth.
Professional and Business Services Employment and Hourly Wages
Looking at the types of occupational areas served by professional and business services, they are quite varied, ranging from administrative and support services that comprises 43 percent of the industry and has an average hourly wage of $18.40 to the higher-paying computer and system design services, which has an average hourly wage of $42.73 per hour.
Professional and Business Services Employment Growth Compared to National Average Sector Growth, By State