The economy doesn't usually boom when pay is falling, so a new survey showing a surprising drop in compensation may be yet another sign of a slowdown.
The Payscale index, which measures quarterly changes in pay in 15 broad industries, ticked downward in the first quarter of 2013, the first decline in nearly two years. During most of 2012, pay rose at the fastest pace since before the recession, as the following chart shows. So the first-quarter decline interrupts a pattern that seemed to reflect a healthy recovery.
Income has been a weak spot in the economy and one reason many economists feel a slowdown is inevitable this year. The tax hikes at the start of the year reduced disposable income for nearly every U.S. worker, although the reduction hasn't yet cut into spending in a measurable way. People have been saving less, though, so at some point they may have to cut spending to rebuild their savings.
More broadly, median household income fell by about 8 percent during the recession, with many families simply ending up worse off, some of them permanently. Incomes have bounced back for some workers, but the broadest measures of national income have gone up mainly because more people are working. "While this may not be a problem if the job market continues to expand," says Russ Koesterich of investing firm BlackRock, "it illustrates that most workers still can't get a raise."
Payscale's numbers come from the firm's own surveys and are more up-to-date than some government data. Since they only measure private-sector pay, they're not directly influenced by trends such as falling government payrolls or any unpaid furloughs that might result from the federal spending cuts known as the sequester. In that regard, a prolonged drop in private-sector pay would be worrisome, because businesses are generally considered to have streamlined and adjusted much faster than government during and after the recession.
One quarterly change could just be a blip, of course, but the dip in pay corresponds with other signs of a slowing economy. The latest jobs report was weak, for instance, and some forecasters expect even lower numbers during the next two or three months, as the sequester starts to bite. Many Wall Street analysts, meanwhile, are expecting a stock-market correction to begin any day now. Consumer confidence has been up and down and even business leaders don't know what to make of the hot-and-cold economy.
If there's any consensus, it's that the second half of 2013 ought to be better than the first, or at least less unsettling. That might be the ideal time to ask for a raise.
Rick Newman's latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.