Wage increases remained strong in August as hiring slowed.

Wages continued to rise sharply in August, even as hiring slowed.

Average hourly earnings rose 0.6 percent in the July-August period, more than the 0.3 percent forecast by economists in a Bloomberg survey. It rose 4.3 percent last year, exceeding the expected 3.9 percent.

Pay rises during the pandemic have been hard to read because they have been affected by what economists call “compositional effects”: The virus layoffs and unusual rehiring patterns have shaken who works and higher-paid workers make up a larger share. the pool can deceptively appear to be climbing average wage rates. Such oddities have been less pronounced in recent months, but changes in the workforce as the virus escalated in August likely triggered some of the apparent disconnect between compensation and hiring.

“A month with no net job gains in the low-wage entertainment and hospitality industry will see a larger increase in average hourly earnings than a month with a more balanced salary increase,” Pantheon Chief Macroeconomics Economist Ian Shepherdson said in a study. Take notes after posting.

Fee climbing strongly in recent months job opportunities exceeded the number of people actively seeking employment. Michael Feroli, chief US economist at JP Morgan, suggested that strong unmet demand for workers may have contributed to strong wage increases, particularly at restaurants and hotels, last month – but that’s not a simple story.

“It is likely that firms are struggling to find workers in this low-wage sector,” Mr. Feroli wrote. 1.3 percent Average hourly earnings growth for entertainment and hospitality workers last month was faster than seen in other industries. At the same time, “total working hours in the industry fell for the first time in August this year, suggesting that the spread of the Delta variant may limit labor demand.”

It is unclear whether wage pressures will continue as workers return to the labor market. While it is difficult to gauge how much increased unemployment benefits are discouraging workers from taking up jobs, early evidence shows that the effect was limitedSeveral companies have signaled that the labor supply has somewhat improved as benefits are cut prematurely in some states. Also, other trends, such as the end of summer and the resumption of in-person school and day care, may allow parents and other prospective employees to return to look for work on occasion.

“We’ve seen a nice first recovery in applicant flows and staffing as these states cut their enhanced unemployment benefits,” said Jeff Owen, Dollar General’s chief operating officer, in a recent statement. earnings call. “Now the good news is that we’re seeing this system-wide and so this effect is hard to notice now because everything is fine.”

If many people start looking for work in the coming months, stagnant labor force participation rate To recover, it could prevent wages from rising so strongly as employers will have to compete less to attract talent.

Higher wages could feed higher inflation, but many economists cautioned that today’s rapid wage growth is unlikely to worry the Federal Reserve, which is responsible for keeping price increases in check while productivity increases.

If the so-calledunit labor costs” stays hidden, meaning it doesn’t cost companies much more to hire labor to produce the same amount of output, which should avoid painfully high wage bills for businesses that can feed consistently higher consumer prices. Fed Chairman Jerome H. Powell reference was made to this idea in the footnote of an important speech last week.

“If wage increases significantly and persistently rise above levels of productivity gains and inflation, businesses can pass these increases on to customers,” Mr. Powell said. “Today we see little evidence of wage increases that could threaten hyperinflation.”