Will paychecks get fatter? Economists think so

by Mark Hamrick

Source: Yahoo Finance-Bankrate.com

It's time to start feeling optimistic about the job market, and one reason is that Americans' paychecks could start getting fatter soon, according to the latest Bankrate Economic Indicator survey of top U.S. economists. The experts expect an increased pace of hiring and an unemployment rate below 6 percent one year from now, plus they look for the improving jobs situation to translate to a pickup in wage growth.

At the same time, the more than two dozen economists who responded to the third-quarter survey see risks to the U.S. posed by turmoil overseas.

Even while the overwhelming majority of the group looks for an interest rate hike in 2015, about half the economists fear the Federal Reserve is already behind the curve in guarding against potential inflation.

What we found

  • Unemployment: On average, the panelists predict that the unemployment rate will slip to 5.7 percent a year from now. In our last survey, conducted three months ago, the economists saw joblessness slipping to 6 percent 12 months down the road. The Labor Department most recently pegged the unemployment rate at 6.2 percent, in July.
  • Hiring: The economists, on average, expect payrolls to expand by a monthly average of nearly 219,000 jobs over the next 12 months. That's slightly above the pace seen over the course of the past year and in July, when payrolls grew by 209,000 jobs.
  • Wages: An overwhelming number of the economists -- 23 out of 26 -- answered "yes" when asked if they think we'll see acceleration in U.S. wage growth over the next 12 months.
  • Labor force: Not much change is expected in labor force participation, which is the number of people working or looking for work. The panelists, on average, see the participation rate rising to 63 percent 12 months from now. That's compared with the 62.9 percent participation that the government reported for July. Labor force participation is being watched closely, in part, because it has dropped to the lowest level in decades.
  • Economic growth: The group, on average, sees gross domestic product expanding at an annual rate of 2.95 percent one year from now. That's above what the Federal Reserve essentially considers "normal," but it's down slightly from our second-quarter survey, when the panel members looked for growth of 3.05 percent 12 months out.
  • Federal Reserve: If the economists have it right, you can look for the Federal Reserve to start raising interest rates again in June 2015. That was the average estimate and also the most common response. The earliest estimate was September 2014 while the latest guess was June 2016. We also asked, "Are you concerned that the Federal Reserve might be falling behind the interest rate curve, given recent economic and inflation reports?" Most (14) said "no," but 12 of the 26 economists answered "yes," indicating their concern.
  • Global tensions: We asked whether the crises in Ukraine and the Middle East would likely have an adverse effect on the global or U.S. economy. Seventeen economists answered "yes," while the remaining nine said "no."