2019 finished strong in terms of worker confidence.
By Larry Basinait
At the end of 2019, the Worker Confidence Index (WCI)Â increased by a robust 7.1 points compared to one yearÂ ago. This suggests that workers remain confident withÂ their employment status compared to historical standards,Â despite a small decline of 2.5 points from the third quarter. Â For the year, three of the four indicesâlikelihood of aÂ promotion, likelihood of a raise of at least 3 percent,Â and trust in company leadershipâincreased by at leastÂ 6 points. The only index to decline was the job securityÂ index, down slightly by 2.8 points.
In the fourth quarter of 2019, workers remain secureÂ about job stability, with the job security index increasingÂ by 0.9 points from the third quarter to 102.4, maintainingÂ a high level of confidence throughout the year. ConcernÂ about job loss is the most important indicator inÂ estimating worker confidence about current and near-termÂ financial outlook.
Females again reported higher levels of confidence inÂ their job security than males in the fourth quarter of 2019,Â consistent with the historical norm. According to PewÂ Research Center, about 20 percent of individuals worryÂ about losing their jobs on a frequent basis, which is lowerÂ than other concerns like being able to save for retirementÂ and paying their bills.
Workforce data from the Bureau of Labor StatisticsÂ (BLS) remains consistent with positive job security studyÂ findings. By the end of the fourth quarter of 2019, theÂ number of people in the U.S. workforce grew by 2 percentÂ from the end of the previous year to a total of 118.5Â million. According to the U.S. Census Bureau, the numberÂ of males in the workforce increased by 0.9 percent sinceÂ the third quarter of 2018, while the number of femalesÂ increased by 1.7 percent from the fourth quarter of lastÂ year.
Worker perceptions about the likelihood of a raiseÂ increased by 11.7 points for the year to 118.9, despite aÂ slight decrease for the quarter. Males felt more confidentÂ about getting a raise, with 39.2 percent anticipating anÂ increase of at least 3 percent at their next review. This is anÂ increase of nearly 4 percent since the fourth quarter of lastÂ year. However, females felt less confident in their ability toÂ receive a raise, down 3 percentage points to 26.3 percent.Â This resulted the largest gapâ12.9 percentâbetween theÂ genders since the inception of the study.
In terms of age, study findings continue to show thatÂ as employees get older, anticipation of receiving a raiseÂ declines. According to Willis Towers Watson, in 2020,Â salaries are expected to increase around 3.0 percent forÂ most employees, with 96 percent of companies planningÂ on giving raises to their employees next year.
As optimism about receiving a raise in the upcoming 12Â months increased, wages have followed. BLS data showsÂ that seasonally adjusted median weekly earnings wereÂ $933 in the fourth quarter of 2019, up a solid 4 percentÂ from one year ago.
While the belief in the likelihood of a promotion indexÂ declined in the fourth quarter to 125.6, it remainsÂ significantly higher than one year ago (112.7). Both malesÂ and females are more optimistic about a promotion thanÂ in the fourth quarter of 2018, but males remain muchÂ more optimistic than females, with a difference of 8.1Â percentage points. Respondents with annual incomesÂ over $100,000 remained the most optimistic (35.5 percent)Â about the likelihood of a promotion compared with otherÂ income groups. This income group has the most disposableÂ income and consumer spending directly impacts the GDP.
The Impact of Market Factors
2019 was a great year for stocks, with all three major U.S.Â indices increasing by over 20 percent for the year. The DowÂ Jones Industrials rose 22.3 percent, the S&P 500 increasedÂ 28.9 percent, and the Nasdaq Composite rose 35.2 percent.Â For the S&P 500 and the Nasdaq Composite, this was theÂ largest yearly increase since 2013. The growth of the stockÂ market is likely a contributing reason as to why the WCIÂ has increased over the last year.
The Consumer Confidence Index (CCI) is a widelyÂ referenced measure designed to gauge U.S. consumerÂ sentiment about the economy. There was a 5.2 pointÂ decrease in fourth quarter of 2019 from the third quarter.Â The Conference Board states that while the economyÂ hasnât shown signs of weakening further, there is littleÂ to suggest that growth will gain momentum in the shortÂ term.
The WCI has correctly predicted the direction of CCI forÂ the next quarterâs end in 15 of the last 20 quarters. An increase in the WCI in the prior quarterÂ would suggest an increase in the CCI at the end of theÂ next quarter. The WCI suggests the CCI will decrease at theÂ conclusion of the first quarter of 2020.