More Americans are finally seeing something new: a pay raise

As the U.S. economy has recovered from recession, the critical missing piece has been a painful lack of pay raises for many Americans.

Their pain may be easing.

Friday’s jobs report signaled that raises have finally begun to flow through an economy in which, once you factor in inflation, most people earn less than when the recession struck in 2007.

The average hourly wage jumped 0.5 percent between December and January – the sharpest monthly gain since 2008 – the government said. The average has now risen 2.2 percent over the past 12 months to $24.75, comfortably above inflation.

So if you’ve gone without a meaningful raise, should you expect one?

Skeptics still have doubts. But the quickening rate of hiring provides reason to hope.

“America is really getting back to work, and that’s the first step to getting better paychecks,” said Tara Sinclair, chief economist at the job posting site Indeed.com and a professor at George Washington University.

The pace of hiring has accelerated 34 percent since 2013. That growth has reduced the number of job seekers and made it harder for employers to find talented employees. The trend, the theory goes, has finally forced companies to loosen their grip on pay to attract and keep the best workers.

Employers have added 3.2 million jobs over the 12 months – including 257,000 in January, 329,000 in December and a sizzling 423,000 in November.

Some economists note that pay figures tend to be volatile from month to month and that January’s blowout average increase might be unsustainable. Still, each additional job increases the number of paychecks in the United States, which drives greater consumer spending. And that tends to fuel further hiring and higher wages.

Ford Motor Co. has announced that up to 500 of its lowest-paid factory workers will receive a 48 percent pay raise to $28.50 an hour. Only 20 percent of its employees can be in the lowest tier, so Ford had to raise wages to hire 1,550 workers to make pickup trucks in Missouri and Michigan. Other major companies, including Aetna and the Gap, have also announced pay increases.

More workers are negotiating higher salaries after reviewing the pay levels advertised on job sites.

David Castaneda felt that the 3 percent raise he recently received didn’t fully value his performance as a financial analyst at a cemetery and mortuary outside Los Angeles.

So the 27-year-old researched other job opportunities and presented the findings to his boss. The result? A 31 percent pay increase to $85,000.

“The opportunities are out there and wages are being pushed up,” Castaneda said. “If everyone were to do this, they would get it. But most people are afraid that their boss would say no and let them go.”

Many Americans, of course, have yet to enjoy pay bumps regardless of a tightening labor pool. The wage figures from the Labor Department are averages. So even when the averages improve, millions of workers continue to endure stagnant incomes and rising expenses. For example, in the mining and logging sector of the economy, which has been pummeled by plunging oil prices, average wages actually fell in December.

Economists also note that average wages can gyrate from month to month. Wages had dipped in December, leading Dean Baker of the liberal Center for Economic Policy and Research to conclude that there’s “no real evidence” of accelerating pay. Wages generally rise at a pace of more than 3 percent in a healthy economy.

Still, the year-over-year average wage increase of 2.2 percent can feel a lot better than it might sound given today’s historically low inflation. Thanks to sinking prices at the gasoline pump, consumer prices have edged up just 0.8 percent over the past 12 months. That means wages have risen a solid 1.4 percent after inflation.

“That’s a step in the right direction,” said Bill Hampel, chief economist at the Credit Union National Association.

Hampel stressed that job growth must continue at the current solid rate for a couple more years to make up for the plunge in incomes that accompanied the recession and then persisted for most of the last five years.

This story was originally published February 6, 2015 at 3:30 PM with the headline "More Americans are finally seeing something new: a pay raise."