Economy Watch: Wage Growth Edges Upward

The Atlanta Fed's Wage Growth Tracker moved higher again.

The Atlanta Fed’s Wage Growth Tracker (WGT) moved higher again in May—the third increase in a row and, according to the bank, consistent with a labor market that’s tightening. At 3.5 percent, the WGT is at a level last seen in early 2009, which represents a bit of good news for the economy, including retailers.

The WGT is a measure of the wage growth for individuals. The Atlanta Fed calculates it using microdata from the Current Population Survey (CPS), and is the median percent change in the hourly wage for individuals observed 12 months apart.

Annual wage growth, as measured by the WGT, used to be fairly robust. In the late 1990s, it hovered between 4.5 percent and 5.5 percent. Grow dropped in the 2000s to around 4 percent, and then collapsed during the recession. For a number of years, it’s hovered around 2 percent; only recently has the WGT increased above 3 percent.

Moreover, median wage growth for job switchers has significantly outpaced that of job stayers in recent months. For job stayers, the May WGT was 3 percent, the same as in April, while for people switching jobs the median WGT increased from 4.1 percent to 4.3 percent in May (the highest reading since December 2007, according to the Atlanta Fed).