Hopeful Sign
Yellen cited “tentative signs of stronger wage growth. I think it’s not yet definitive, but it is a hopeful sign.”
Lower-wage workers suffered more than others during and after the 18-month recession that ended in June 2009. The unemployment rate for U.S. workers with only a high school education peaked at 11 percent and remained at 5.8 percent in May. For those with a bachelor’s degree or more, unemployment peaked at 5 percent and has fallen to 2.7 percent.
Atlanta Fed researchers found the biggest wage gains following the recession went to full-time workers and those with college educations. Now, those at the low end of the pay scale are catching up, according to a new wage-tracking index that the Atlanta bank introduced this week.
“A lot of the wage increases happening now are going to people who basically haven’t got a raise in five years,” said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York.
Wal-Mart Workers
McDonald’s Corp. announced plans in April to increase pay at U.S. company-owned stores by at least $1 above the local minimum wage. Wal-Mart earlier this year increased the pay of U.S. workers to at least $9 an hour. That was followed by pay raises at Target Corp. and TJX Cos.
Raising wages has helped Wal-Mart Stores Inc. retain workers and attracted more job applicants, Greg Foran, president of Wal-Mart’s U.S. operations, said at a meeting with investors in June.
“That low-wage workers are getting bigger pay increases signals a broader acceleration in wage gains,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania.
The Federal Open Market Committee repeated in June it will raise rates from near zero when there is “further improvement in the labor market” and it is confident inflation will return to the 2 percent goal. Zandi expects that in September.