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PayScale Index Q2 2018: Nominal and Real Wage Growth Falter Despite Low Unemployment

The PayScale Index tracks quarterly and annual trends in compensation. The latest Index for Q2 2018 shows that both nominal wages and real wages declined quarter over quarter. Due to inflation rising faster than wage growth, workers in Q2 2018 are earning 1.4 percent less “real wages” than they did a year ago.
PayScale Index found that due to inflation rising faster than wage growth, workers in Q2 2018 are earning 1.4 percent less “real wages” than they did a year ago.Click To Tweet

Despite a historically low level of unemployment, nominal and real wage growth falter in Q2

The Q2 index showed that while nominal wages are 1.1 percent higher than what they were a year ago, they declined 0.9 percent in comparison to Q1 2018. Meanwhile, real wages that factored in inflation took a hit: Quarter over quarter growth was -1.8 percent, the biggest decline since Q2 2011. Year over year growth was -1.4 percent, the largest drop since Q1 2014. Due to the rapid rise of the Consumer Price Index (CPI),  workers in

Twenty two of the 31 Metro Areas We Cover Saw a Q/Q Decline in Nominal Wages

Austin (-2.3 percent), Orlando (-1.7 percent) and Milwaukee (-1.6 percent) had the largest Q/Q dips. However, Orlando was the only one of the three to enter negative territory for annual growth (-0.2 percent). With 4.2 percent Y/Y growth, the San Jose metro area tops the list of metro areas for fastest Y/Y nominal wage growth, and by a large margin. Cleveland is a distant second with a Y/Y rate 1.6 percentage points lower.

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While San Jose had the fastest Y/Y growth rates, the Cleveland metro area had the strongest Q/Q numbers. Nominal wages grew 1 percent in Q2, bringing Cleveland’s Y/Y nominal wage growth to 2.6 percent.

Most job categories saw a Q/Q decline in nominal wages

Thirteen of the 19 job categories we cover saw a Q/Q decline in nominal wages. The largest decline was in manufacturing and production jobs, which saw a 5 percent decrease Q/Q and 1.2 percent decrease Y/Y.

Construction jobs also took a big hit in Q2. Wages declined by 4.7 percent Q/Q and 0.2 percent Y/Y. However, part of this contraction may be explained by a previous spike in construction wages after a particularly destructive hurricane season in 2017.

Accounting & finance (2.5 percent) along with art & design (2.4 percent) jobs posted the largest Y/Y nominal growth figures.

Twelve of the 15 industries we cover saw Q/Q decline in nominal wages

Nominal wages in the accommodation & food services industry fell 2.6 percent Q/Q and 0.3 percent Y/Y. It was the only industry to post both negative Q/Q and Y/Y growth.  

The largest Q/Q decline in wages was in the transportation & warehousing industry. Wages fell by 2.9 percent Q/Q and are only 0.1 percent higher than what they were a year ago.  

The second largest decline Q/Q was in the construction industry. Nominal wages fell by 2.7 percent Q/Q but were still up 0.3 percent from a year ago. This large decline in wages may be an adjustment after a spike following a particularly destructive 2017 hurricane season, a trend which was also observed in the number of construction jobs.

The finance & insurance and nonprofit industries posted modest nominal Q/Q growth of 0.3 percent. However, their Y/Y growth of 2.4 percent and 2.3 percent, respectively, were the largest Y/Y growth observed amongst the 15 industries.

Nominal wages in the tech industry held steady between Q1 and Q2, though they are still 2.1 percent higher than they were in Q2 2017. With 14.5 percent growth since 2006, tech has seen the second largest wage gains since the great recession, trailing only the engineering & science industry.

To see more detailed wage trends, check out the PayScale Index on our website.

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