With the unemployment rate set to fall nearer to pre-recession levelsby year's end, 2014 could be the Year of the Raise - at least for somepeople.
For millions of workers, it's about time: Real medianfamily income has fallen 6.4% to $52,163 since peaking in 2007. Eventhough middle-class incomes have lost ground to inflation for decades,workers have opportunities to catch up during the sweet part of economiccycles.
The issue is whether such awindow will open this year. In the strongest position are workers withscarce skills in cities or industries where nearly full employment willarrive by year-end.
The numbers are moving in workers'direction. Unemployment, now 6.7%, could be under 6% by December, saysJoel Naroff, president of Naroff Economic Advisors. Excluding workersunemployed more than six months, unemployment is only 4.2%, JPMorgan Chase economist Michael Feroli says.
Majorcities from Boston to San Francisco could near full employment, about5.5%, by fall, which may begin shifting salary leverage to workers,Naroff says.
"The pool of workers (that) employers have been usingto keep wages down will turn into a puddle," Naroff said. "Minneapolisis already in a labor shortage, and most of Texas will be at 5%unemployment in a year.''
Some effects are visible. A FederalReserve survey this month reported "moderate" wage pressures inMinneapolis, where unemployment is now 4%. In Dallas, where unemploymentis 5.6%, reports of pay increases and wage pressures are up, the Fedsaid.
Unemployment rates in places hard-hit by the recession arewell below the national average. Much of Florida - including Orlando,Miami, Tampa and Jacksonville - has unemployment of 6.3% or lower. SanFrancisco has seen joblessness drop to 6%, from 10.7% in 2010.
Nationally,155 of 372 metro areas are at 6% or lower, most likely to approach 5%by the end of the year, Naroff said. That shifts leverage in the cities,and also in industries congregated there, such as San Francisco's techbusiness, he said.
Surveys by compensation consultants Aon Hewitt and Buck Consultantssay corporations plan to keep 2014 raises around 3%, not adjusted forinflation, similar to 2013. Moody's Analytics and the Federal Reservedon't expect pay to accelerate this year.
"Most estimatesof the unemployment rate below which real wage growth accelerates arearound 5.5%," Moody's Analytics chief economist Mark Zandi said. "Thissuggests wage growth won't accelerate in earnest until 2016."
Butit may come sooner for more-skilled workers willing to switch jobs, saidBob Funk, president of Express Employment Services in Oklahoma City.
"You have to take better care of people coming out of a recession,'' Funk said. "The skilled people are already looking.''