The ADP® Workforce Vitality Index, which measures the total real wages paid to the US private sector workforce, is 110.6 in the third quarter of 2014 (2Q2011=100, Seasonally Adjusted). The Index, part of the ADP Workforce Vitality Report, is composed of a number of metrics including job holders' wages, job holders' hours worked, job switchers' wages, and total employment. The Index grew by 0.77% from the previous quarter. See Table 1 below.
The ADP Workforce Vitality Index considers four types of workers in the labor market: those who stay with the same firm (job holders), those who change jobs (job switchers), those who are newly hired by a firm (entrants), and those who left the firm either voluntarily or involuntarily (leavers). There are several factors contributing to the growth of the Index. Chart 1 shows the contributions from each of these factors. Real hourly wages, hours worked for job holders and net employment have been the main contributors for the growth of the Index. Since the beginning of 2013, job holders' wages have become the primary contributor to growth. This may mean that employers are becoming more confident about the economy and are focusing on retaining their talent by raising wages. Also shown in Chart 1, the contribution from employment gains has remained steady.
To see Chart 1: Contribution to ADP Workforce Vitality Index Growth, please click here: http://media.marketwire.com/attachments/201410/MOD-80283_Image1.jpg
"The growth we are showing in the ADP Workforce Vitality Index is being primarily driven by an increase in real hourly wage rates," said Ahu Yildirmaz, vice president and head of the ADP Research Institute®. "This is a good sign that may lead to increased consumer spending and a boost for the economy."
The ADP Workforce Vitality Index grew faster in the South and West compared to the Northeast and Midwest Regions. Real hourly wage growth and employment growth has driven the growth in the South and West. Real hourly wages grew most quickly in trade industries, which include retail trade. Professional Services, which include technology companies, drove employment growth in the South. While the ADP Workforce Vitality Index has trended higher in all four regions over the past three years, the gap between South & West and Midwest & Northeast began to appear in the second half of 2012 and has been growing ever since (see Chart 2 below). This widening gap can be attributed to faster employment growth, a slower decline in the growth rate of hours-worked and faster growth of real hourly wages in the South and West.
To see Chart 2: ADP Workforce Vitality Index by Region, please click here: http://media.marketwire.com/attachments/201410/MOD-80284_Image2.jpg
Table 1 shows that real hourly wages have grown nationally. However, as is evident from Chart 3, the pace of growth has not been uniform across age groups. The fastest growth in real hourly wage has been among the millennials (those born 1980 to the early 2000s). However, Generation X and the Baby Boomers did catch up in the third quarter of 2014.
To see Chart 3: Job Holders' Real Hourly Wage Growth by Age, please click here: http://media.marketwire.com/attachments/201410/MOD-80285_Image3.jpg
The 4th Quarter 2014 ADP Workforce Vitality Report will be released on January 21, 2015.
About the ADP Workforce Vitality Report
The ADP Workforce Vitality Report was developed by the ADP Research Institute in collaboration with Moody's Analytics. It is an unprecedented, in-depth quarterly analysis of the overall vitality of the U.S. labor market based on actual data that identifies labor market trends and dynamics across multiple dimensions. These dimensions include employment growth, job turnover, wage growth and hours worked. In addition to the macro data presented in the report, there are also segment-specific findings by industry, state, gender, age, experience, and pay level. For more information about the report, please visit http://workforcereport.adp.com/. For a glossary of key terms, please visit here.
About Moody's Analytics
Moody's Analytics helps capital markets and risk management professionals worldwide respond to an evolving marketplace with confidence. The company offers unique tools and best practices for measuring and managing risk through expertise and experience in credit analysis, economic research and financial risk management. By providing leading-edge software, advisory services and research, including the proprietary analysis of Moody's Investors Service, Moody's Analytics integrates and customizes its offerings to address specific business challenges. Moody's Analytics is a subsidiary of Moody's Corporation (NYSE: MCO), which reported revenue of $3.0 billion in 2013, employs approximately 8,400 people worldwide, and has a presence in 31 countries. More information is available at www.moodysanalytics.com.
Employers around the world rely on ADP® (NASDAQ: ADP) for cloud-based solutions and services to help manage their most important asset — their people. From human resources and payroll to talent management to benefits administration, ADP brings unmatched depth and expertise in helping clients build a better workforce. A pioneer in Human Capital Management (HCM) and business process outsourcing, ADP serves more than 610,000 clients in 100 countries. ADP.com.
Copyright © 2014 ADP, LLC.