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Among the good jobs news: Wages are rising as businesses look for employees

At least in some industries

A hiring sign at Stella's Place cafe in Des Plaines, Ill., on July 11. (Nam Y. Huh/AP)

One of the things that surprised many economists as the economy surged several years ago was that the decline in unemployment didn’t seem to be putting much upward pressure on wages. In theory, the two go hand in hand: Employers eager to hire in a competitive marketplace raise wages to make their positions more appealing. So low unemployment should lead to increasing salaries — but it often didn’t.

The coronavirus pandemic crunched large parts of the economy, and they’re still being rebuilt. In recent months, that rebuilding has often meant that employers have scrambled to fill positions left vacant by some people who are rethinking their career paths. But that scramble seems to at last be doing what economists would have expected: It’s pushing wages higher.

“The data for recent months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages,” according to the Bureau of Labor Statistics’ July jobs report, released Friday. It’s still a bit murky: “Because average hourly earnings vary widely across industries, the large employment fluctuations since February 2020 complicate the analysis of recent trends in average hourly earnings,” the report says.

There are some places where the effects correlate pretty obviously, though, including in the leisure and hospitality industry. For years, that industry — think restaurants, bars, hotels — has been among the lowest-paying for nonsupervisory employees. It still is. But, as in other private-sector industries, average weekly earnings have climbed since March 2020, when the pandemic first started to shake up the economy.

When considered as change relative to March 2020, the surge in earnings for leisure and hospitality employees is obvious. Since that month, weekly earnings are up about 25 percent. They’re up 13 percent over the pre-pandemic high.

This is also the industry where employers have been most eager to fill jobs. May data on job openings shows that the rate of openings in leisure and hospitality was way over the private sector overall and well over other industries.

More job openings, bigger upward pressure on wages.

This doesn’t hold across industries, mind you. That leisure and hospitality employees make up 1 in 8 private-sector jobs gives that industry significant weight. But some industries that haven’t seen unusual employment demand have also seen large increases in earnings. (We’re comparing the most recent data for each here, but that means comparing May job-opening data to July jobs data.) Those tend to be white-collar, high-paying jobs.

The mining and logging industry, which makes up about 0.5 percent of private-sector employment, has not seen a sharp increase in weekly earnings. But before the pandemic, it was the industry with the highest average weekly wages.

The leisure industry had relatively low wages before the pandemic and made up a large chunk of private-sector jobs. It was also hit hard by the pandemic in a way other industries weren’t, prompting employers to race to fill jobs when the crisis receded. All of that contributes to the recent wage increase.

There’s a shadow hanging over all of this, though: the delta variant. New cases have surged in the United States in recent weeks, a period that largely isn’t included in the jobs data that’s collected through the middle of the preceding month. If new restrictions on social interactions are implemented, the leisure industry could see another round of shocks, disrupting the pattern above.

But for now, that growth in wages is clearly good news for employees.