Wage gains remained strong in August as hiring slowed.

Wage gains have been hard to read during the pandemic because they have been affected by what economists call “composition effects”: Virus layoffs and unusual rehiring patterns have shaken up who is working, and when higher-paid workers make up a bigger share of the pool, it can deceptively look as if average pay rates are climbing. Such quirks have been less pronounced in recent months, but changes in the labor force as the virus surged in August probably drove some of the apparent disconnect between compensation and hiring.

“A month with no net job gains in the low-paid leisure and hospitality sector will see a bigger increase in average hourly earnings than a month with more even payroll growth,” Ian Shepherdson, the chief economist at Pantheon Macroeconomics, wrote in an research note after the release.

Pay has been climbing strongly in recent months as job openings have exceeded the number of people actively looking for work. Michael Feroli, the chief U.S. economist at J.P. Morgan, suggested that strong unmet demand for workers may have contributed to especially strong wage gains at restaurants and hotels last month — but that it wasn’t a simple story.

“It is possible that firms are having a hard time finding workers in this low-wage sector,” Mr. Feroli wrote, noting that the 1.3 percent average hourly earnings increase for leisure and hospitality employees over the past month was rapid compared to that seen in other sectors. At the same time, “aggregate hours in the sector declined for the first time this year in August, suggesting that the spread of the Delta variant may be limiting demand for labor.”

It is unclear whether the wage pressures will last as workers return to the labor market. While it is hard to gauge how much enhanced unemployment benefits discouraged workers from taking jobs, and early evidence suggests that the effect was limited, a few companies have signaled that labor supply has been improving somewhat as benefits were cut off early in some states. Plus, other trends — the end of summer and the resumption of in-person school and day care — may allow parents and other would-be workers who have been on the sidelines to return to the jobs search.

Article source: https://www.nytimes.com/2021/09/03/business/economy/wages-august-2021.html