Line chart tracks wage growth
Y-axis: Wage growth YoY (%); x-axis: 2010-2022
Wage growth was relatively flat from 2010 to mid-2014, rising from just above 1.5% to about 2.5%. After that it accelerated to 3.7% in early 2020, declining to 3.5% in May. Since then it increased to 3.8% at the end of Q2, then declined to 3.5% at the end of Q3 2020, rising slightly to 3.7% by the end of November. As of late February 2021, wage growth stood at 3.4%. By the end of August 2022, it was at 6.7%.
Line chart tracks capital spending plans (left Y axis, annualized 3-month change, %), and the capital spending diffusion index (capital equipment orders, %), right Y-axis: Percent change (QoQ) 3-month moving average; X-axis: January 2019 to August 2022.
Change in capital spending plans declined moderately from December 2018 (about 23.8%) to late February 2020 (about 16%). During the same time period, the capital spending diffusion index (equipment orders) fell to about -14%, eventually falling to near -40% by April 2020. By May 2020, capital spending had also fallen sharply, to about -13%.
Recovery then saw sharp improvement, with capital spending plans rising from about -13% in June to more than 12% by October. Meanwhile, equipment orders rose from less than -13% in June to near 35% in July, then declining to about 3%, and remained in single digits until declining to about -3% in May 2022.
As of August 2022, the change in capital spending plans was over 14%, with equipment orders at about 0.6%.
Line chart compares compensation/corporate income with job growth
Left y-axis: Ratio of compensation to corporate income, right y-axis: Job growth YoY(%); x-axis: 1980-2022
With some exceptions, when the ratio of compensation to corporate income is highest, job growth declines. For example, an early 1980 peak in the ratio of compensation/corporate income (roughly 0.65) was followed by very low job growth (below -2%). Compensation peaks in the late 1980s-early 1990s of about .65 were accompanied by low job growth of about -1%. Since the 2008 recession, the compensation/corporate income ratio has been relatively low (0.56 – 0.58) and job growth increased dramatically from near -5% to roughly 1.5% (by 2012). The compensation ratio was at a recent peak near 0.63 at the end of Q2 2020 when job growth fell precipitously from .54% at the end of Q1 2020 to about -8.6% at the end of Q2. Compensation/corporate income fell to 0.62 the decline in job growth narrowed to -6.1% by the end of Q3 2020. At the end of June 2022, compensation ratio was at about 0.6 and job growth near 4% (end of Q3).
Line graph tracks job opportunities vs. level of education
Y-axis: Unemployment rate (%); x-axis: 2010-2022
Unemployment decreased with education since 2010. While unemployment has generally declined since 2010, it saw a spike in early 2020, reaching nearly 20% for those without a high school diploma. Since then it has moderated somewhat. Reference table for results as of September 2022:
|Less than a high school diploma||5.6%|
|High school graduates, no college||3.7%|
|Some college or associate degree||2.9%|
|Bachelor’s degree or higher||1.9%|
Sources: Bloomberg, Bureau of Economic Analysis, Bureau of Labor Statistics, U.S. Commerce Department, and Wells Fargo Investment Institute. Wage growth: monthly data from January 1, 2010 to August 31, 2022. Capital spending plans and real capital equipment orders: monthly data from January 1, 2019 to August 31, 2022. Compensation/corporate income: quarterly data from January 1, 1980 to June 30, 2022. Job growth: quarterly data from January 1, 1980 to September 30, 2022. Unemployment rate: monthly data from January 1, 2010 to September, 2022. YOY = year-over-year. Capital spending plans represented by three month moving average of a diffusion index of Dallas, Kansas City, N.Y., Philadelphia, and Richmond Fed district respondents reporting planned increase. Real capital equipment orders represented by three month moving average of non-defense equipment shipments (for example, aircraft).
- Investment spending has been losing momentum in recent months on economic outlook uncertainties into 2023, apparently from diminishing capital spending plans and from declines in inflation-adjusted capital goods orders.
- Labor-market dislocations have pressured wages higher, even as unemployment has hovered near its pre-pandemic level.
- Labor shortages created by last year’s powerful recovery are boosting wages in lower-paying services industries dominated by less-skilled workers who were most exposed to the pandemic-induced recession in 2020.