THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, January 23, 1995 TAG: 9501240461
SECTION: BUSINESS WEEKLY PAGE: 15 EDITION: FINAL
TYPE: Cover Story
SERIES: Forecast '95
SOURCE: BY LON WAGNER
STAFF WRITER
LENGTH: Medium: 64 lines
The economic recovery of 1994 is expected to continue this year, as unemployment rates creep downward toward what economists consider full employment.
Normally, that would be good news for workers: Companies looking to hire would be competing with each other for employees, and that would mean wage increases.
But don't plan on spending that raise yet. As the experts have been arguing for two years, this is not a normal recovery. This is a new economy.
``There really hasn't been much wage or compensation growth nationally,'' said Russel Deemer, an economist with Crestar Bank in Richmond, ``and Hampton Roads is no different.''
Hampton Roads' unemployment rate is hovering around 5 percent, only half a percent above theoretical full employment for the region.
Hampton Roads is considered to reach full employment when its unemployment rate hits 4.5 percent.
This region's relatively young work force, with many one-person households, means its full employment rate is higher than, say, in Charlotte, where full employment is considered 3 percent.
But for several reasons, even if Hampton Roads reaches that mythical statistic, it won't likely translate into higher wages for workers here.
The main reason: The Federal Reserve Bank increased interest rates six times in 1994, and most economists think the Fed will continue tightening the screws. If the Fed is successful, Deemer said, the economy should grind along at a pace that means jobs will be added slowly enough to avoid pressures to increase wages.
In 1995, William M. Mercer Inc. of Richmond projects that Hampton Roads residents can claim at least a small victory. For the first time in several years, Hampton Roads salaries are expected to increase at the same rate as the national average, 4.3 percent.
Mercer attributes that to a flattening in national pay raises, along with new stability in Hampton Roads salaries.
Tom Alberg, a compensation consultant with William M. Mercer Inc., said salaries in 1995 won't depart from their pattern during the past few years - barely staying ahead of inflation.
``That's been the trend in the past few years,'' he said, ``the pay increases have been a percent or so above the cost-of-living (increases).''
But the increases have not kept pace in all sectors of the economy. Government workers, for instance, saw their wages rise 3.7 percent during 1994, while those in the computer industry saw their pay increase 5.0 percent.
Increases for other sectors: retail, 4.0 percent; financial, 4.3; health care, 3.8; manufacturing, 4.1.
On the positive side, Alberg said most companies that buffered themselves during the recession with wage freezes seem finally to have started giving raises again.
KEYWORDS: ECONOMY EMPLOYMENT UNEMPLOYMENT JOBLESS RATE SALARIES
by CNB