“Wage and salary increases are becoming more widespread, according to panelists in the January 2016 NABE Business Conditions Survey, even as sales growth and hiring at their firms flatten, and they trim their expectations for expansion in the overall economy,” says National Association of Business Economics (NABE) President Lisa Emsbo-Mattingly, director of research in the Global Asset Allocation division at Fidelity Investments.

“Nearly half of respondents—the largest share in over a decade—say their firms had increased pay in the past 3 months, and an even higher share anticipates pay to go up in the first quarter of 2016,” adds Emsbo-Mattingly.

“Meanwhile, there was little change in the percentage of respondents whose firms experienced—or expect—a quarterly increase in sales or employment. For the first time in 3 years, more than a quarter of panelists expect real gross domestic product to increase by just 2% or less in the next 4 quarters.”

While equal numbers of panelists report declining and rising profit margins, it is the first time since the July 2013 Survey that rising margins did not predominate, according to Survey Chair Patrick Jankowski, senior vice president of research at the Greater Houston Partnership. Jankowski commented that “[f]ewer panelists than in the past 3 surveys report difficulty filling open positions, and shortages of skilled labor are less prevalent among respondents’ firms than in the two previous surveys.”

NABE members and other selected industry economists are surveyed regularly for their analysis of, and opinions about, the United States and global economies; the results provide key insights into economic conditions and business conditions in their firms. The January 2016 Survey report reflects fourth-quarter 2015 results and the near-term outlook.

Employment highlights

Results from the survey that address employment include:

• Survey results reflect stable employment conditions. The net rising index (NRI)—the percentage of respondents reporting rising sales at their firms minus the percentage reporting falling sales—of 19 is unchanged from October 2015 Survey. However, there is great disparity among the sectors. The finance, insurance, and real estate (FIRE) and service sectors experienced widespread employment growth during the past 3 months whereas the goods-producing and transportation, utilities, information, and communication (TUIC) sectors reported more job losses than gains at their firms.
• As stated, for the first time in more than a decade, nearly half (49%) of respondents report their firms’ wages and salaries rose in the latest quarter. The NRI for wages and salaries rose sharply to 45 in the January Survey from 28 in the October survey—the highest NRI since at least January 2005. But wage increases were much less prevalent in the goods-producing sector (35% of respondents) and in TUIC firms (33%); than in the FIRE sector (61%) or the services sector (50%).
• Expectations for wage increases over the next 3 months are more prevalent than in the previous six surveys. (The question was not asked prior to July 2014.) Also, 58% of respondents anticipate increases in wages and salaries at their firms, resulting in an NRI of 54, compared to an NRI of 40 in the October Survey.
• Survey results reflect stable employment conditions. The NRI of 19 is unchanged from October 2015 Survey. However, there is great disparity among the sectors. The FIRE and service sectors experienced widespread employment growth during the past 3 months, whereas the goods-producing and TUIC sectors reported more job losses than gains at their firms.
• Survey and the smallest share of respondents indicating shortages since the April 2015 Survey.
• Roughly four out of 10 respondents (42%) report that their firms had difficulty filling open positions over the last 3 months, a decrease from 49% in the previous survey. Panelists from the goods-producing sector are the only ones to report increased difficulty in filling open positions.
• The share of respondents expecting their firms to reduce employment in the next 3 months rose to 15%—the largest since the survey first asked this question in the July 2014 Survey. However, the number of respondents expecting job increases at their firms during the next 3 months also rose.

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