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Wage Gains of 3% Taking Hold as US Employers 'Need to Pay Up'

While employers hope to retain and attract workers with better benefits such as extra vacation days, money may be talking louder now.

At CNH Industrial NV’s factory in Racine, Wisconsin, workers are building bright red Case IH tractors the company’s known for, and they’ll sell for hundreds of thousands of dollars. But there’s something even more valuable on the assembly line: the employees.

CNH, one of the world’s largest agricultural-equipment makers, needs to increase its Racine workforce of more than 500 by 5%, and it’s proving tough to do by the January goal. They’re competing with other big companies with a local presence, including Amazon.com Inc., S.C. Johnson & Son Inc. and Harley-Davidson Inc. Management has already raised wages 6% for production employees in Racine this year, and officials are in talks with the United Automobile Workers union for further increases for skilled tradespeople.

CNH’s situation shows why hourly earnings are likely to keep picking up after surpassing 3% for the first time in this expansion, according to figures out last week. A Labor Department report Tuesday is expected to show U.S. job openings remained close to a record in September. While employers hope to retain and attract workers with better benefits such as extra vacation days, money may be talking louder now.

“We’ve seen a tight labor market for a while, but it seemed like employers were doing everything they possibly could besides raising wages,” said Sarah House, senior economist at Wells Fargo & Co. “It seems that hasn’t been enough. They’re starting to realize, ‘Hey, we just need to pay up a little bit more.’”

The median estimate of economists for 7.09 million job openings in September -- following 7.14 million in August -- would exceed the number of unemployed U.S. workers by a record 1.12 million. Those numbers lag the Labor Department’s closely-watched jobs report by a month; Friday’s figures showed the unemployment rate held in October at 3.7%, the lowest since 1969.

CNH, based in the U.K., is in particular need of skilled candidates: Each tractor is highly customized, and the tools often require advanced training and experience. Aside from wages, they’re still buttering up employees with perks: The Racine plant’s human resources manager, Susan Prey-Fobes, says she and her colleagues recently grilled 600 burgers to feed workers for lunch.

Feeling Valued

Making employees feel valued is “as much a part of this frenzy on recruiting as anything else,” she said by phone.

Corporations have flagged the worker shortage in surveys. A Federal Reserve Beige Book survey released last month cited anecdotes of firms being so strapped for workers that they’re considering robots and having difficulty filling shifts. Respondents to surveys by the Institute for Supply Management, a group comprised of executives who make purchasing decisions for their companies, have flagged finding skilled workers as a top issue.

At the same time, corporations face uncertainty over how to invest amid the trade war with China. And firms frequently are putting tax cuts toward things other than hourly wages, such as one-time bonuses and stock buybacks.

“It’s not like we’re thinking there’s a surge in wage growth coming and that this is a massive inflationary story -- we’re just saying that the direction of travel does seem up," said Michael Gapen, chief U.S. economist at Barclays Plc. “Wages are firming, and that’s the right view. They’re just doing so modestly.”

By Katia Dmitrieva and Lydia Mulvany

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