[Apologies for the light posting: I’ve been traveling, and there isn’t a lot of news this week.]
A couple of months ago I wrote that raising wages may have become a “taboo,” i.e., that in some cases employers may be refusing to raising wages, even though it may be costing his money. One of the items I relied upon was from the NFIB, as small business owners presumably are not “monopsonies.” As of February, the last time I had data, small business owners were complaining of inability to fill positions, but were not raising wages.
Over the last three months, that may have changed, as revealed in the NIFB survey from May. Let’s compare hiring in small business through February:
and now through May:
In the last three months, employment growth per firm has finally broken out to the upside.
Meanwhile, unfilled job openings in small businesses, which have been soaring for the last five quarters (red dots, blue dot at end is for month of May):
are finally giving rise to actual wage increases over the last three months (red dots in the below graph are monthly):
This is supportive of the YoY% growth in average wages for nonsupervisory workers as of last week’s employment report for May:
As I noted then, it looks like wage growth for ordinary workers may finally be starting to accelerate.
While it seems crystal clear that the tax cuts for large businesses are just going into stock buybacks, it is certainly possible that small businesses are using some of their extra cash to increase pay for new workers.
If the behavioral paradigm I hypothesized — that the taboo against raising wages has been undergoing an extinction burst — the most recent data from the NFIB supports that employers are finally conceding that the Great Recession-era behavior of freezing wages is no longer successful.