Wages drop 0.3% in December

By Barbara Hagenbaugh
USA Today

WASHINGTON — Workers' wages fell for the first time in more than a year in December, the government said yesterday.

The report supported recent data that have suggested the job market still is sluggish despite an improving economy.

The Commerce Department said wages declined 0.3 percent to $5.13 trillion at a seasonally adjusted annual rate in December as a lackluster job market gave workers little leverage when negotiating for raises or higher salaries at new jobs. It was the first drop since October 2002.

Despite the decline, consumers continued to increase spending. But wages will need to rise if the gains in consumer spending are to continue, says Joel Naroff, president of Naroff Economic Advisors in Holland, Pa.

Consumers "have benefited from refinancings, tax cuts and government" benefits, Naroff says. "But those are only short-term mechanisms. It is time for the private sector to pick up the slack by adding jobs."

There was little hope on that front yesterday, at least in manufacturing, where more than 3 million jobs have been cut since December 1997. The Institute for Supply Management said factory hiring expanded at a slower rate in January than in December despite improvement in the manufacturing sector.

The ISM said its index of factory hiring fell to 52.9 percent in January from 53.5 percent in December. The overall index rose to 63.6 percent last month from 63.4 percent in December.

Numbers above 50 represent expansion, while those below suggest contraction.