Personal Finance

U.S. wage growth is cooling — but it’s still hot in these jobs

Published

10 months ago

April 16, 2024

Business Finance News

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Wage growth has cooled from its scorching pandemic-era pace. But there are still pockets of heat.

Workers are getting relatively big annual raises in occupational sectors like legal, dental, child care, cleaning and sanitation, and medical information, for example, according to a new analysis by job site Indeed.

Nationally, wages grew at 3.1% a year in March, well below the recent 9.3% peak in January 2022, according to Indeed, which tracks average pay advertised in its online job listings.

However, there’s “massive variation across industries,” according to Julia Pollak, chief economist at career site ZipRecruiter.

At a high level, wage growth in 2024 is above average in 47% of job sectors compared with 2019, the year before the pandemic hit, according to the Indeed analysis.

Among them, it’s highest in the legal profession: Indeed found that average workers saw their paychecks grow at a 5.7% pace in March 2024 versus a year earlier. That’s down just 0.1 percentage points from six months ago.

The analysis found that the dental and child care sectors ranked just behind, each at 4.8% annual growth; medical information and cleaning and sanitation jobs placed just behind, both at 3.9%, according to the analysis.

By comparison, software developers have seen the lowest annual growth since March 2023, at 0.4%, according to data provided to CNBC by Indeed. That’s down from a recent 9% peak in April 2022.

Strong wage growth doesn’t necessarily translate to a high salary, though.

“I don’t think someone will leave their software development job to work in child care because wage growth is higher,” said Allison Shrivastava, a labor economist and author of the Indeed report. “But if you were working in [similar-paying jobs like] retail or food prep and you wanted higher wages, that might be worth looking at,” she said.

The average child care worker earns $15.42 an hour and $32,070 a year, according to data for May 2023 compiled by the U.S. Bureau of Labor Statistics. By comparison, software developers make $66.40 an hour and $138,110 annually on average, according to BLS data. Dentists make $96.57 an hour and $200,870 a year, on average, BLS data says.

Wage growth surged in 2021 and into 2022 as employers had to “roll out the red carpet” for workers at a time when labor was scarce and workers were “demanding to be made whole for inflation,” Pollak said.

March jobs report 'kills the argument' that a recession is coming, says Seth Harris

She said it also “peaked at different times for different industries” during the Covid-19 pandemic due to a “complex web” of factors like labor supply and demand.

Some roles, such as face-to-face jobs in food services, became less attractive overnight after the pandemic led to a big shift in remote work. Turnover rose quickly among in-person occupations compared with turnover across remote ones, Pollak said.

For example, workers in accommodation and food services saw annual earnings growth peak at 16.1% in December 2021, according to ZipRecruiter data. By comparison, it found that those in the information sector saw growth peak at 7.8% in September 2022.

Current national wage growth is in line with the 2019 pre-pandemic average, indicating a labor market that is widely viewed as healthy.

While the average worker enjoyed historically rapid wage growth in the recent past, their pay wasn’t keeping pace with inflation. As inflation has fallen, buying power has risen again on average.

Shrivastava of Indeed said the job market “has cooled down from a really, really feverish pace.” However, she said, it has cooled to a place that “seems more sustainable” for workers and businesses.

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Personal Finance

Social Security Fairness Act beneficiaries may face lengthy wait

Published

9 hours ago

January 28, 2025

Business Finance News

More than 3.2 million people will see increased Social Security benefits, under a new law.

However, individuals who are affected may have to wait more than a year before they see the extra money that’s due to them from the Social Security Fairness Act, the Social Security Administration said in an update on its website.

“Though SSA is helping some affected beneficiaries now, under SSA’s current budget, SSA expects that it could take more than one year to adjust benefits and pay all retroactive benefits,” the agency states.

The Social Security Fairness Act eliminates two provisions — known as the Windfall Elimination Provision and Government Pension Offset — that previously reduced Social Security benefits for certain beneficiaries who also had pension income provided from employment where they did not contribute Social Security payroll taxes.

Those provisions reduced benefits for certain workers including state teachers, firefighters and police officers; federal employees who are covered by the Civil Service Retirement System; and individuals who worked under a foreign social security system.

The law affects benefits paid after December 2023. Consequently, affected beneficiaries will receive increases to their monthly benefit checks, as well as retroactive lump sum payments for benefits payable for January 2024 and after.

The benefit increases “may vary greatly,” depending on an individual’s type of Social Security benefits and the amount of pension income they receive, according to the Social Security Administration.

“Some people’s benefits will increase very little while others may be eligible for over $1,000 more each month,” the agency states.

The Social Security Administration said it cannot yet provide an estimated timeline for when the benefit adjustments will happen.

In the meantime, the agency is advising beneficiaries to update their mailing address and bank direct deposit information, if necessary. In addition, noncovered pension recipients may now want to apply for benefits, if they are newly eligible following the enacted changes.

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Personal Finance

Student loans not affected by federal aid freeze

Published

10 hours ago

January 28, 2025

Business Finance News

'Tremendous amount' of instability under new Trump administration, says CIO

The White House is pausing federal grants and loans, according to a memo sent out Monday night, but the freeze will not impact student loans or financial aid for college.

The freeze, which could affect billions of dollars in aid, noted an exception for Social Security and Medicare. The pause “does not include assistance provided directly to individuals,” according to the memo.

The pause gives the White House time to review government funding for causes that don’t fit with President Donald Trump‘s policy agenda, according to Matthew J. Vaeth, acting director of the White House Office of Management and Budget.

The memo specifically cited “financial assistance for foreign aid, non-governmental organizations, DEI, woke gender ideology, and the green new deal.”

What student aid may be affected

The U.S. Department of Education said the freeze on federal aid will not affect Federal Pell Grants and student loans. It also has no bearing on the Free Application for Federal Student Aid for the upcoming year.

“The temporary pause does not impact Title I, IDEA, or other formula grants, nor does it apply to Federal Pell Grants and Direct Loans under Title IV [of the Higher Education Act],” Education Department spokesperson Madi Biedermann said in a statement.

In addition to the federal financial aid programs that fall under Title IV, Title I provides financial assistance to school districts with children from low-income families. The Individuals with Disabilities Education Act, or IDEA, provides funding for students with disabilities.

The funding pause “only applies to discretionary grants at the Department of Education,” Biedermann said. “These will be reviewed by Department leadership for alignment with Trump Administration priorities.”

The pause could affect federal work-study programs and the Federal Supplemental Educational Opportunity Grant, which are provided in bulk to colleges to provide to students, according to higher education expert Mark Kantrowitz.

However, many colleges have already drawn down their funds for the spring term, so this might not impact even that aid, he said. It may still affect grants to researchers, which often include funding for graduate research assistantships, he added.

Why the freeze caused confusion

“While the memo says the funding pause does not include assistance ‘provided directly to individuals,’ it does not clarify whether that includes money sent first to institutions, states or organizations and then provided to students,” said Karen McCarthy, vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators.

Most federal financial aid programs are considered Title IV funds “labeled for individual students,” and so would not be impacted by the pause, McCarthy said. But all other aid outside of Title IV is unclear at this time, she said: “We are also researching the impact on campus-based aid programs since they are funded differently.”

“When you have programs that are serving 20 million students, there are a lot of questions, understandably,” said Jonathan Riskind, a vice president at the American Council on Education. “It is really, really damaging for students and institutions to have this level of uncertainty.”

The American Council on Education’s president, Ted Mitchell, called on the Trump administration to rescind the memo.

“This is bad public policy, and it will have a direct impact on the funds that support students and research,” he said. “The longer this goes on, the greater the damage will be.”

Personal Finance

Why you may be getting ‘shortchanged’ on CD interest rates, researcher says

Published

12 hours ago

January 28, 2025

Business Finance News

Boonchai Wedmakawand | Moment | Getty Images

You may be leaving money on the table when it comes to certificates of deposit, some research suggests.

CDs have a set term, ranging from a few months to five or more years. Upon maturity, banks return the depositor’s principal plus interest.

Consumers who want their money early must generally pay a penalty, losing out on months of interest. However, paying that withdrawal penalty may be worthwhile for many savers who adopt the right strategy.

That’s what is suggested in a recent research paper from Matthias Fleckenstein, associate professor of finance at University of Delaware, and Francis Longstaff, finance professor at the University of California, Los Angeles.

Rather than pick a short-term CD, consumers often get a higher return by choosing a long-term CD and paying a penalty to pull money out early, they found.

Consumers who are unaware of the strategy may get “shortchanged” by banks, Fleckenstein told CNBC.

‘The rule rather than the exception’

Here’s an example: If an investor puts $1 in a five-year CD with a 5% interest rate and cashes it out after one year with a penalty equivalent to six months of interest, they would receive about $1.03, which is slightly more than the $1.01 they would get from a one-year CD with a 1% interest rate, despite the penalty incurred for early withdrawal.

Banks frequently price CDs this way, Fleckenstein and Longstaff wrote in their paper, published in October in the National Bureau of Economic Research.

The researchers examined weekly CD rates offered by 16,891 banks and branches — ranging from small community banks to big nationwide institutions — from January 2001 to June 2023. Rates were for accounts up to $100,000.

About 52% of CDs offered during that period had such “inconsistencies” in pricing when comparing a given term against a longer-term CD cashed in early, they found.

“It’s the rule rather than the exception,” Fleckenstein said.

“There are banks that do this all the time,” he said, and “there are some that don’t do this at all.”

At banks where this happens, the difference in returns “is not tiny,” Fleckenstein said. In fact, the pricing inconsistency is about 23 basis points, on average, over the roughly two decades they assessed, he said.

Given that disparity, the average investor who invested $50,000 could have gotten an extra $115 of interest by picking a longer-term CD and cashing it in early, their research suggests.

The average size of that pricing difference rose as interest rates began to increase during the Covid-19 pandemic, Fleckenstein said.

CDs often for ‘safety and liquidity’

Households that save in CDs are generally looking for “safety and some liquidity” for a chunk of their assets, said Winnie Sun, co-founder of Irvine, California-based Sun Group Wealth Partners and a member of CNBC’s Financial Advisor Council.

The typical CD buyer has a goal in mind, like saving for a home down payment, and wants to earn a modest interest rate without subjecting their money to much risk, Sun said.

About 6.5% of households held assets in CDs as of 2022, with an average value of about $99,000, according to the most recent Survey of Consumer Finances.

Like any investment, there are pros and cons to CDs.

For example, unlike other relative safe havens like high-yield savings accounts or money market funds, CDs offer a guaranteed return over a set period with no chance of market-based losses. In exchange, however, CDs offer less liquid access to your cash than a savings account and lower long-term returns than the stock market.

“Shop around for the best CD rate across banks, but also look within banks at whether it actually may pay off to accept a longer term but pay an early withdrawal penalty,” Fleckenstein recommended, based on his research findings.

The option may not be as prolific in the current market environment, though.

Long-term CDs typically pay a higher interest rate than shorter-term ones, Sun said. But average rates for one-year CDs are currently higher than those for five-year CDs: 1.7% versus 1.4%, respectively, according to Bankrate data as of Jan. 20.

Households can pursue other CD strategies, Sun said.

For example, instead of putting all savings into a long-term CD, consumers might put a chunk of their money into a long-term CD and with the remaining funds build a “ladder” of shorter-term CDs that mature more quickly. They can then buy more CDs if they’d like once the shorter-term ones come due.