Economy

Higher Wages in Store for Americans This Year

Paul Ausick

Published: January 30, 2018 1:05 pm

Last Updated: January 12, 2020 3:57 am

The U.S. economy is ticking along rather nicely, thank you very much. A new survey by the National Association of Business Economists (NABE) indicates that sales, profits and wages all rose in December. Only optimism about future sales was constrained.

The best news, perhaps, is that the Net Rising Index (NRI) — the percentage of panelists reporting rising sales minus the percentage reporting falling sales — for wages and salaries rose from 37 in the NABE’s October survey to 48 in the January survey. This represents the highest index reading since January 2000 and the third highest since NABE began analyzing the data in April 1982.

Wage increases are likely to be even more widespread over the next three months, as the NRI for expected wage costs increased from 46 in the October survey to 58 in January, the highest level since this question was added to the survey in April 2014.

The data come from 119 NABE members who completed a survey on business conditions in their firms or industries. The survey was fielded between December 26, 2017, and January 10, 2018, and reflects both fourth-quarter results and the near-term outlook.

NABE Vice-President Kevin Swift, who is the chief economist for the American Chemical Council, said:

The panel’s outlook for growth in the overall economy over the next four quarters surpasses the relatively positive assessments of the past few quarterly surveys. Compared to the near-term outlook three months ago, more firms expect increases in the next three months in their firms’ profits, employment and capital spending. However, optimism regarding sales in the first quarter of 2018 is less widespread than it has been since 2016.

More respondents report that their firms are hiring—and having trouble filling positions—than in the October survey. Looking at 2018 as a whole, 63% of respondents expect their firms to increase sales, and three times as many expect hiring to increase rather than decrease.

Among the highlights of the survey (which is available only to NABE members) are these:

• A larger share of panelists (47%) indicates that sales at their firms rose in the fourth quarter of 2017 compared to the share that reports declines. The NRI increased from 24 in the third quarter to 30 in the fourth quarter, as the share of respondents reporting falling sales at their firms decreased to 17%.
• Optimism regarding future sales declined to 51% of survey respondents who now expect sales to increase over the next three months, the lowest such share since July 2016. Conversely, the percentage expecting their firms’ sales to decrease in the next three months climbed to 15%, and the NRI for expected sales is 36, the lowest reading since April 2016.
• Profit margins gained momentum in the fourth quarter, reversing the decline reported in the October survey. Just over one-third of respondents report rising profit margins. The NRI of 23 is the highest index reading since January 2015.

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