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You may not be getting a raise, but these workers are

The middle class is struggling to get ahead, largely because incomes are stagnant. Many workers can’t get a meaningful raise, others earn less than they used to and too many people are still unemployed, earning nothing.

But some employees are getting handsome raises, and they’re not just CEOs and Silicon Valley developers. New data published by Moody’s Analytics shows that workers in a large subset of the labor force earned 4.5% more in the third quarter than they did a year earlier. That’s more than twice the average increase in wages tracked by the government. It’s also more than twice the rate of inflation, which means these workers, at least, are getting ahead.

Moody’s analyzed data provided by payroll processor ADP, covering 24 million employees—roughly one-fifth of all U.S. workers.

“There are some signs of wage growth beginning to pick up,” Mark Zandi, chief economist at Moody’s Analytics, said in the video above. “People are starting to see pay increases that are above the rate of inflation, and the pay increases are accelerating.

Here’s a breakdown of wage gains by select characteristics:

Source: Moody's Analytics
Source: Moody's Analytics

The numbers show a few important trends. First, young people with limited experience are getting the largest raises, probably because they have the lowest pay to start with and a small raise might go a long way. That’s good news for recent college graduates, especially those with student debt. Older workers -- generally paid much more -- are getting smaller raises, but those pay hikes still exceed the rate of inflation, currently 1.7%.

It's not surprising the largest raises have been in the financial services industry, where money speaks loudly. But all other industries represented in the data did nearly as well. Raises at small companies -- particularly those with fewer than 50 employees -- have been larger than those at big firms, which is encouraging given that big multinationals have enjoyed most of the spoils of the recovery so far, including very strong profits. Many small companies have struggled, so if they’re boosting pay that’s a sign the laggards in the recovery are catching up.

Pay bumps are also spread pretty evenly among the eight industries represented in the ADP data. There are no major variations when sorted by gender, region, and full-time workers versus part-timers.

Wage growth has been the missing link in a labor-market recovery that otherwise looks pretty good. Employers have been adding about 225,000 jobs per month, on average, so far in 2014. That’s a strong pace of job growth, comparable to the boom years of the late 1990s. But there seem to be fewer high-paying jobs than in the past and more lower-paying ones. And a smaller portion of the adult population is working, which depresses total income for many families and degrades purchasing power. Government data show wages rising at only about 2% per year, which is roughly the same as inflation, meaning typical workers aren’t really getting ahead.

Some caveats regarding the ADP data may explain the different readings. Companies that use ADP may pay better than average, since they’re profitable enough to use a payroll service in the first place. (Many small businesses can’t afford such outsourcing.) And while the ADP data measures base pay, it doesn’t account for factors such as overtime and bonuses, which have been coming down lately, keeping wage growth in the government figures weak.

Still, the ADP analysis could reflect a strengthening labor market that could show up soon as accelerating wage gains in the closely watched government data. “It’s a good leading indicator,” Zandi says, “that suggests if we continue to create jobs at the pace we have been recently, the job market will be tight enough in three, six, nine months that we will see pay raises across the board.” Even, perhaps, at companies that can’t afford to hire ADP.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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