Breaking it down: a decomposition of the 2024 gain in private-sector average hourly earnings by major industry sector

Each month, the Current Employment Statistics (CES) program of the U.S. Bureau of Labor Statistics (BLS) produces detailed estimates of industry employment, hours, and earnings of workers on private payrolls. CES earnings data are available for the private sector on both an hourly and a weekly basis.

Annual gains in average hourly earnings of all employees in the private sector averaged $1.11 from 2015 through 2024, though a clear shift to higher gains occurred in 2020 because of the COVID-19 pandemic’s effect across the economy.¹ (See chart 1.) 

From 2015 to 2019, the annual gain in hourly earnings averaged $0.75. In the 5-year period that followed, the annual gain averaged $1.46, nearly double the average gain of the prior 5-year period. Although the gain trended lower in the last 2 years, falling to $1.37 in 2024, it remained elevated.

Total private-sector average hourly earnings

Private-sector average hourly earnings data for a given reference month are published along with employment data by the CES program, usually the first Friday of the following month. As such, they are a principal federal economic indicator and are widely used by policy makers and researchers to develop plans and policies for and conduct research on the current state of the U.S. economy.² At the total private-sector level, average hourly earnings of all employees are simply the aggregate payrolls of all employees in all private-sector industries divided by the aggregate hours of all employees in those industries.³ Aggregate payrolls refer to the total amount of money earned by full- and part-time employees who received pay for any part of the pay period that includes the 12th day of the month, and aggregate hours are the total hours for which those employees are paid. Changes in these aggregate series at the industry level feed into the aggregate hours and payrolls series at the private-sector level, and outsized changes for any given industry can have an impact on how average hourly earnings change at the total private level. Examining over-the-year changes in hourly earnings at major industry levels helps partially illuminate where the most recent annual gain may be concentrated. By breaking down the pieces that make up total private-sector earnings into their components, we can see how changes in those components directly influenced total private average hourly earnings over the year.

How do major industry sector average hourly earnings affect total private-sector earnings?

From December 2023 to December 2024, professional and business services experienced the largest increase in hourly earnings of all major industries with a gain of $2.11. (See chart 2.) This was followed closely by information ($1.90), financial activities ($1.84), utilities ($1.81), and construction ($1.65). In contrast, retail trade saw the lowest increase of $0.64, followed by wholesale trade ($0.72), leisure and hospitality ($0.80), and transportation and warehousing ($0.84).

The gains in hourly earnings in chart 2 are unique to each major industry and do not explicitly measure the effect each of those industries has on the change in total private earnings. To isolate the effect of each major industry on the annual change in total private earnings, we took the following steps:

1) Average hourly earnings for December 2023

For the total private sector, we obtained December 2023 aggregate payrolls, aggregate hours, and average hourly earnings of all employees.⁴

2) Over-the-year changes in aggregate payrolls and aggregate hours from December 2023 to December 2024

For major industry sectors, we obtained December 2023 and December 2024 aggregate payrolls and aggregate hours of all employees and subtracted the December 2023 figures from the December 2024 figures to get the over-the-year changes for each.

3) December 2024 average hourly earnings for each major industry sector

For one major industry sector at a time, we independently added the over-the-year changes in both of the industry-specific aggregates to the corresponding December 2023 aggregates for the total private sector to calculate new December 2024 aggregate payrolls and aggregate hours for the total private sector. Then, we divided December 2024 aggregate payrolls by aggregate hours to get the new December 2024 average hourly earnings for the total private sector.

4) The difference between December 2023 and December 2024 average hourly earnings

We subtracted the December 2023 total private average hourly earnings figure from the recalculated December 2024 total private average hourly earnings figure.

Table 1 shows an example of the four-step process described above using the construction industry.

The resulting difference for each major industry sector represents that industry’s direct contribution to the over-the-year change in average hourly earnings at the total private level. The sum of all contributions for all major industry sectors equals the actual published change in average hourly earnings at the total private level.⁵ Table 2 displays the results of the calculations described above for each major industry sector.

From December 2023 to December 2024, professional and business services had the largest contribution of all major industry sectors to the total private-sector gain, accounting for $0.37 of the $1.37 total gain, or 26.7 percent. (See chart 3.) 

Private education and health services had the second largest contribution of $0.26, or 19.3 percent, followed by manufacturing ($0.15, or 10.8 percent), and financial activities ($0.15, or 10.7 percent).⁶ The smallest contributions came from mining and logging as well as utilities ($0.01 each, or less than 1 percent), followed by wholesale trade ($0.04, or 2.9 percent).

Comparing an industry’s average hourly earnings contribution with its employment share

Industries with large contributions to changes in total private hourly earnings tend to be those with comparatively large employment bases, but these contributions are not always proportional to industries’ share of private-sector employment. Professional and business services, which accounted for 26.7 percent of the private sector’s overall earnings gain, constituted 16.9 percent of all private-sector employment in December 2023, the second largest share of all major sectors. (See chart 4.) Private education and health services had the largest share of employment with 19.4 percent, nearly identical to its 19.3-percent contribution to private-sector earnings.

In contrast, both retail trade and leisure and hospitality accounted for private-sector earnings growth (4.2 percent and 4.9 percent, respectively), well below their shares of employment (11.6 percent and 12.5 percent, respectively).

Manufacturing, with 9.6 percent of private-sector employment, contributed 10.8 percent of the earnings gain.

How component industry average hourly earnings affect average hourly earnings at the private-sector level

Among the components of professional and business services, both administrative and support services and computer systems design and related services contributed $0.08 to the total private gain in hourly earnings. (See chart 5.) The contribution of administrative and support services was heavily influenced by changes in the temporary help services component industry, which showed a large annual decline in aggregate hours. This in turn caused aggregate hours for both administrative and support services and the professional and business services sector as a whole to decline over the year, which served to boost the hourly earnings gain at the total private level.

Corporate, subsidiary, and regional managing offices ($0.06) and architectural, engineering, and related services ($0.04) also added to the increase in total private earnings over the year. The remaining contributions were spread among the other component industries.

Within private education and health services, both ambulatory health care services and hospitals boosted the over-the-year change to total private hourly earnings, with contributions of $0.10 each. (See chart 6.) Notably, aggregate payrolls for both components (at 6.8 percent and 7.3 percent, respectively), exceeded the growth rate in total private aggregate payrolls, which advanced 4.6 percent over the year. Nursing and residential care facilities ($0.02) and social assistance ($0.02) made smaller contributions to the total private annual gain in average hourly earnings.

In manufacturing, both computer and electronic product manufacturing and transportation equipment manufacturing contributed $0.03 to the over-the-year gain in total private earnings. (See chart 7.) Machinery manufacturing accounted for a smaller amount of the earnings gain ($0.02). The remaining component industries within manufacturing demonstrated less robust contributions, adding smaller amounts to the over-the-year gain in total private earnings. Two industries (textile product mills and apparel manufacturing) had very small negative effects on the earnings change at the total private-sector level. Of interest, within apparel manufacturing, aggregate payrolls declined 4.8 percent over the year and aggregate hours declined 2.5 percent. Of the 18 component industries in manufacturing, 2 industries showed declines in aggregate payrolls over the year and 9 showed declines in aggregate hours over the year.

Within financial activities, both credit intermediation and related activities and insurance carriers and related activities contributed $0.06 to the annual average hourly gain for total private earnings. (See chart 8.) Within these 2 component industries, aggregate payrolls advanced 6.7 percent and 6.3 percent, respectively, rising faster than total private payrolls over the year. The remaining contributions were spread among the other component industries.

Among the components of leisure and hospitality, food services and drinking places contributed $0.05 to the total private average hourly earnings gain due largely to an annual decline in aggregate hours of 0.1 percent. (See chart 9.) The remaining component industries changed little over the year and contributed smaller amounts to the total private gain.

In retail trade, contributions to the total private annual gain in earnings were widespread among the component industries. (See chart 10.) Food and beverage retailers contributed roughly $0.02 to the over-the-year change in total private earnings due primarily to a decline in aggregate hours of 1.5 percent. Most of the component industries contributed $0.01 each to the change in total private earnings over the year. General merchandise retailers had a small negative contribution to the earnings gain at the total private level. Aggregate hours in general merchandise retailers advanced 6.9 percent over the year, resulting in the small negative contribution to total private hourly earnings, despite the industry’s 9.9-percent gain in aggregate payrolls. Increases in aggregate hours in a component industry dilute that industry's impact on total private hourly earnings and can cause a negative contribution if the gain in hours is substantial.

Of all components across major industries within the private sector, ambulatory health care services had the largest contribution to the over-the-year gain in total private earnings, accounting for 10 cents of the $1.37 gain, or 7.6 percent.⁷ (See table 3.) This was slightly above the industry’s share of total private employment as of December 2023 (6.4 percent). In contrast, hospitals, which had the second-largest contribution to the annual gain in total private earnings at 7.2 percent, accounted for only 4.1 percent of December 2023 employment. That 3.1-percentage-point difference suggests the industry contributed more than its fair share to the overall earnings gain.

Of the 15 selected component industries with the largest contributions to total private earnings, only 2 industries had contributions that were smaller than their share of total December 2023 employment, resulting in negative differences: food services and drinking places (–5.3 percentage points) and administrative and support services (–0.8 percentage points). These negative differences indicate these industries contributed less to the gain in total private earnings than their share of employment would suggest.

In total, the 15 industries with the largest contributions accounted for $0.85 of the $1.37 gain in total private earnings over the year, representing 62.3 percent of the increase. The combined employment in these industries in December 2023 represented 47.4 percent of total private-sector employment.

Conclusion

Decomposing changes in private-sector aggregate hours and aggregate payrolls by industry allows us to determine each industry’s direct impact on changes in average hourly earnings at the total private level. From 2020 to 2024, average hourly earnings increased each year, reaching $1.37 in 2024. At the major industry sector level, professional and business services (constituting 16.9 percent of all private-sector employment) and private education and health services (19.4 percent of all private-sector employment) accounted for $0.37 and $0.26, respectively, of the $1.37 increase. Among component industries of all major sectors, 15 industries representing 47.4 percent of total private-sector employment accounted for $0.85 of the $1.37 increase in total private earnings.