Economics: Strong wage growth continues even as hiring slows in tandem with the economy
Job growth remains strong even as it has slowed in recent months, primarily in a stalling manufacturing sector, but even there and throughout the economy, wage growth remains robust. Hiring continues to be much more pronounced in the formal rather than informal sector even three years after a 2021 reform began pressuring companies to bring workers they had been outsourcing directly onto their payrolls and enroll them with social security.
However, a number of other factors help explain the extent to which wages continue to outpace slowing levels of production, beginning with another annual 20% minimum wage hike nationwide. Collective bargaining negotiations have also produced major wage increases (which are up a real 8% in 2023). A 7.7% real expansion of the total wage mass last year that accelerated to 9.7% in the fourth quarter largely explains the significant dynamism of consumption during the past year. Growth in tertiary sector wages is being driven in part by MSMEs and the self-employed, as they have been raising their prices after having to keep them in check throughout the pandemic and initial recovery. Total compensation growth in the manufacturing sector has been more limited, a trend that is expected to extend through the first half of the year but will be offset by growth in retail commerce and services wages for the same period.
In this week’s Outlook, we analyze the most recent labor market data and what we can expect in the coming year.
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