International Forecaster Weekly

CORPORATE AMERICA JACKING UP WAGES - Execs Expect the Trend to Continue

Corporate America is shelling out higher wages to employees, and business executives expect to continue doing so.

According to its new quarterly survey released today by the National Association of Business Economists, a record high 58% say they increased pay at their companies during the 3rd quarter.

            Just about the same number expects that trend to continue in the months ahead.

Guest Writer | November 2, 2021

By Dave Allen for Discount Gold & Silver

Corporate America is shelling out higher wages to employees, and business executives expect to continue doing so.

According to its new quarterly survey released today by the National Association of Business Economists, a record high 58% say they increased pay at their companies during the 3rd quarter.

            Just about the same number expects that trend to continue in the months ahead.

NABE President David Altig, who’s an executive vice president at the Atlanta Fed, says:

“Two-thirds of respondents anticipate an increase in real GDP between 3.0% and 5.9% from Q3 2021 to Q3 2022, while 28% of respondents forecast real GDP to grow between 0.1% to 2.9%.”

NABE’s survey chair Eugenio Aleman, who’s the chief economist for the U.S. Energy Information Administration, added: 

“[T]he finance, insurance, and real estate sector experienced a strong third quarter…while the transportation, utilities, information, and communications sector suffered the largest deterioration across the board.” 

“One-third of panelists indicates that the biggest downside risk to their company’s outlook is increased cost pressures,” Aleman continued. “The biggest upside risk is a subsidence of COVID-19 cases and fears...”

Survey Highlights

  • Two-thirds of respondents (66%) anticipate an increase in real GDP between 3.0% and 5.9% from Q3 2021 to Q3 2022.
  • 28% of respondents forecast real GDP to grow between 0.1% to 2.9% — up from only 2% who held this view in the July survey.
  • Almost two-thirds (65%) report that sales increased in the 3rd quarter (Q3) of 2021—slightly less than the 66% who reported increases in the 2nd quarter in the July survey.
  • The share reporting a decrease in sales, however, increased from 3% in the July survey to 6% in the current survey.
  • The percentage of panelists reporting rising profits minus the percentage reporting falling profits in Q3 2021 is 25, a strong reading, but also a marked decline from the Q2 2021 record high of 35.
  • No respondents indicate their firms charged lower prices during Q3, and none expect their firms to cut prices over the next three months.
  • Goods-producing firms lead the increase in price hikes, with 85% of respondents from that sector reporting that their firms charged higher prices in Q3, and 92% expecting price increases in Q4.
  • 70% report cost increases in Q3, up from 61% in Q2 —led by the transportation, utilities, information, and communications sector at 100, and followed by the goods-producing sector at 92.
  • The percentage of respondents indicating that wages rose in Q3 increased to 58% from 51% in the July survey. This is the fifth consecutive increase for wages.
  • Hiring slowed down during the 3rd quarter; 30% cite increased employment at their firms during Q3, with 7% reporting declines.
  • 47% report shortages of skilled labor during the quarter, compared to 32% who reported such shortages in the July survey (covering Q2 2021).
  • 38% report that capital spending rose at their firms during Q3, up from 34% in Q2, with 5% noting declining investment over the third quarter.
  • The biggest downside risk to their company’s outlook is increased cost pressures, cited by 33% of respondents. This is followed by rising COVID cases (28%) and supply-chain disruptions (20%).
  • 31% indicate that the biggest upside risk to their outlook is a subsidence of COVID-19 cases and fears in the U.S. followed by a ramping up of supply chains (26%) and an increase in people returning to work (25%).
  • 65% indicate that their firms will implement a flexible/hybrid work environment even after the pandemic subsides — up from 61% in the July survey.
  • 47% say their companies are experiencing a worker shortage, up from 39% in the July survey, with the shortfall most prevalent in the goods-producing sector.
  • None of the panelists indicates that their firms’ labor shortages will abate by the end of 2021.
  • 61% of panelists indicate that their firms’ sales volumes have already returned to their normal level of operations relative to the pre-pandemic period.

Strong demand in the economy is driving rising wages as well as continued hiring plans on the part of business leaders.

But rising business costs — for things like labor and raw materials — have some economists on alert for spiking inflation trends.

Average weekly earnings are up 4.6% over the last year — rising from about $1,027 last September to $1,074 this year, according to the Bureau of Labor Statistics.

The sectors most in need of more workers have seen unusual gains: construction pay has jumped 7.1% and leisure and hospitality surged 11.2%.

Starting this past May, job openings exceeded the number of job-hunters — and wages are bound to continue their rise as employers compete even harder for labor.

We’re a long way from what is usually seen as a sustained economic rebound much less a recovery. Keep that in mind as you decide what to do with your disposable, investable income. 

The coming months should be really good for gold and silver.