Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Good job news: Wages are rising. Really.

By Chris Isidore, senior writer


NEW YORK (CNNMoney.com) -- The end of more than two years of job losses can't come soon enough for most Americans.

But with all the attention given to the number of jobs on U.S. payrolls and the unemployment rate, it's easy to miss one important sign of improvement in the job market: paychecks have started to get bigger.

Despite the millions of people who have lost jobs during the past year, there are signs that personal income is increasing. Even a small gain in income is significant. If consumers have more money in their pocket, that can help to boost consumer spending and create the demand that will prompt a resumption of hiring.

"At the end of the day, we need income so people can spend money," said Sung Won Sohn, economics professor at Cal State University Channel Islands. "It is a sign that things are beginning to improve."

According to the government's monthly job report for February, average hourly earnings have risen by 1.9 percent over the past 12 months..

That's not the only evidence of a turnaround in pay.

An analysis of income and employment taxes withheld from more than 130 million U.S. workers by TrimTabs Investment Research found that total salaries and wages increased by 0.7% in February compared to a year ago. This is the first increase since 2008, and it represents $42 billion extra dollars in consumers' pockets compared to a year ago.

TrimTabs CEO Charles Biderman said he was surprised and encouraged by the increase in income, which occurred even as TrimTabs estimated there was another loss of 30,000 jobs in February, and total losses of 3.9 million jobs in the past year.

He said companies are adding hours back for workers who had been put on a part-time basis during the worst of the recession. He said there also was a much better environment than a year ago for year-end bonuses that were paid in February.

"As things stabilize, businesses are starting to spend a little more," Biderman said.

Sohn said strong gains in productivity are also allowing employers to pay their skilled workers more. Productivity rose at nearly a 7% rate in the fourth quarter, according to the government..

But Bob Brusca of FAO Economics cautions that Friday's employment report could show unduly bad numbers for both payrolls and hours due to the major snow storms that closed many businesses in the eastern United States during the week the Labor Department surveys employers.

He said bigger bonuses and slightly higher salaries can't by themselves make up for the spending power lost due to the massive job cuts of the past two years.

"You have to put these 8 million plus people back to work," he said. To top of page

Search for Jobs

Index Last Change % Change
Dow 18,202.42 -25.88 -0.14%
Nasdaq 5,289.17 -16.54 -0.31%
S&P 500 2,154.05 -5.88 -0.27%
Treasuries 1.55 -0.01 -0.32%
Data as of 11:38am ET
Company Price Change % Change
Procter & Gamble Co 88.62 0.25 0.29%
Bank of America Corp... 15.20 -0.09 -0.61%
Nike Inc 54.00 -1.34 -2.42%
Apple Inc 113.77 0.68 0.60%
Chesapeake Energy Co... 6.32 0.09 1.43%
Data as of 11:24am ET
Sponsors

Sections

Elizabeth Warren renewed her demand for Wells Fargo CEO John Stumpf to step down and return the money he made while the bank's fake account scandal was taking place. More

Venezuelans, who can, are traveling to the United States to buy basic goods as chronic shortages erode a sense of normalcy. More

BlackBerry has decided to stop making its own phones. The company is going to outsource production of its once-popular devices and focus more on software. What will President Obama and Kim Kardashian West do now? More