ST. GEORGE – Southern Utah unemployment is at its lowest level in several years, and this may be starting to put upward pressure on wages. It may also signal a change in the business cycle in southwest Utah.
Most southwest Utah counties experienced job creation during the second quarter of 2014, with unemployment rates reaching the lowest levels in half a decade, Lecia Langston, senior economist for the Utah Department of Workforce Services, said.
“While wage data is not yet available for 2014, an ever-decreasing unemployment rate and strong job growth suggest that wages for the recently hired should begin to rise in southwest Utah during the coming months,” Langston said.
The most recent occupational wage information is from 2013, showing the median hourly wage for Washington County at $13.73 per hour.
Iron, Beaver, Garfield and Kane counties are surveyed together and have a median wage of $12.71, Langston said. Iron County dominates that figure because its economy is much larger than the other three counties.
Data from a new analysis program is giving economists a broader picture of wage behavior during the most recent recession and recovery than was previously available.
The data Langston uses is from “stable” hires and jobs, which are those lasting at least three months from a 12-month period. This allows tracking of broader trends by eliminating the effect of temporary and seasonal employment.
This trend of higher wages is seen first in new-hire wages and can provide a first indicator of a change in economic conditions, Langston said. The average new-hire wage responds more directly and rapidly to the business cycle than the average wage.
In southwest Utah, the average wage of new hires was more reactive to the economic downturn and expansion than the average wage for all jobs. Both wages increased dramatically during the boom preceding the recent recession. However, the average hire wage peaked much earlier and lost ground more rapidly.
The average wage for new hires plateaued from 2006 through 2007, while the all-job average wage didn’t stop climbing until the recession began.
In addition, the average new-hire wage dropped more intensely – 9 percent – than the average wage for all jobs – 3 percent – during the downturn.
Therefore, using the average new-hire wage may provide a recessionary early warning in the future. If the average wage of hires starts to plateau, it likely suggests the economy is starting to cool.
Labor market must be expanding, near full employment
The labor market must be expanding and near “full employment” to drive wages up, Langston said.
Economic theory and common sense suggest that wages would rise during an economic expansion and decrease during a recession, she said. However, this generalization is not always true.
During the early days of an expansion, average wages often do not show strong gains because many entry-level jobs are being added at lower wages. This tends to drag down the average wage, she said.
Average wages do not rise significantly until the labor market starts to get tight, characterized by a small number of unemployed people. This pattern was obvious during the recovery from the 2001 recession.
Average wage has slowly increased
In southwest Utah, the average wage for all jobs has slowly increased since the recession. However, after an early spurt in 2010, new-hire wages have yet to show a significant increase. A large pool of jobless workers has been available to take existing new jobs.
Sluggishness in the average new-hire wage in several large industries seems responsible for the lack of wage growth, Langston said.
In 2013, wages in retail trade, healthcare/social services, educational services and transportation/warehousing showed little change in 2013. Additionally, average new-hire wages dropped significantly in manufacturing, information and professional/scientific/technical services.
When compared, the relationship between the surge in hiring during the 2005–2007 boom and wages in southwest Utah becomes clear, Langston said. At that time, unemployment rates were also very low; in most southwest counties, the jobless rate was below 3 percent. Although hiring also surged in 2012 and 2013, unemployment has just recently dropped below the 4 percent mark in the area’s two largest counties: Washington and Iron.
Though 2014 hire wage data has not yet been publicized, wages for the recently hired should start increasing as unemployment rates continue decreasing and strong job growth continues.
Average wages can increase during recession
In the 2001 recession, the average wage for all workers actually increased, Langston said. While surprising, it’s not uncommon. As the newly hired, lower-paid workers are let go, those with more experience and higher wages are retained, pushing the average wages upward. However, job loss during the recent recession was so great that the average wage for all workers slipped somewhat, she said.
Wages for different groups, industries behave differently
Wages for different demographic groups, genders and industries can behave differently than the average.
- The average wage for women in southwest Utah increased through most of the 2007–2009 recession, only to slip in the early recovery.
- Between 2000 and 2013, the average wage for those 65 and older has steadily increased through boom and bust.
- The average wage for recently hired southwest Utah workers between the ages of 35 and 64 surged much earlier in the recovery than did hire wages of younger age groups.
- The average wage for all workers ages 35 to 64 also showed relatively steady improvement even during the recession.
- In the post-recession time period, the average wage for young southwest Utah workers (14 to 24 years of age) has shown little improvement.
- The hiring wage of construction industry workers actually reached its all-time peak during the height of the recession, as government stimulus monies spurred growth in higher-paying heavy construction.
- Washington County unemployment hits 6-year low; Iron County at 4.2 percent
- Consensus figures show strong economy has Utah in position to invest
- Unemployment drop, economic stimulation discussed at Site Select meeting
- Unemployment down, job openings up; how fare Washington, Iron counties
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