Falling wages for new hires only won’t appease the Fed.
Pay for New Hires Is Shriveling
The Wall Street Journal reports Pay for New Hires Is Shriveling
Among postings for more than 20,000 job titles on ZipRecruiter’s site this year, the average pay for a majority of roles has declined from last year. Some of the steepest drops have been in technology, transportation and other sectors that experienced frenzied hiring sprees in 2021 and early 2022.
The declines mark a stark turnaround from 2022, when compensation for three-quarters of advertised job titles rose from the year before, according to ZipRecruiter. In a July survey of about 2,000 employers conducted by the online hiring platform, nearly half said they had reduced pay for recent job openings.
Because new hires account for less than 4% of all employed workers each month, says Julia Pollak, chief economist at ZipRecruiter, it can take a while for adjustments in their pay to show up in the federal data. The mass layoffs many large companies have conducted lately, particularly in tech, have helped push salaries for new hires downward, says Pollak.
These trends will likely dampen job hopping, especially at the high end, but it may take a long time for any impact in the BLS data.
Atlanta Fed and BLS Nominal Measures
According to the Atlanta Fed Wage Tracker, wages are up 5.7 percent from a year ago. For Production and nonsupervisory jobs, the BLS says wages are up 4.8 percent from a year ago. And the overall BLS average is 4.4 percent.
Those are nominal wages. Adjusted for inflation, workers have more to spend.
Atlanta Fed and BLS Real Measures
Real means adjusted for inflation using the CPI as the measure of inflation.
The Atlanta Fed Wage Tracker had real wages rising starting March of 2023. The BLS measure lags by a month for production and nonsupervisory employees but did not turn positive for all workers until June.
Nominal Wages Dollars Per Hour Percent Change From Month Ago
That is the chart the Fed is watching, not salaries of new employees.
Post-pandemic, wage increases are much higher than pre-pandemic since March of 2021. Wages are rising at an average monthly annualized rate of 5.7 percent, in nominal terms, since then.
For the two year period immediately prior to the pandemic, wages were rising at an annualized rate of 3.4 percent.
Should the Fed Declare Defeat and Move On?
On August 21, I asked Should the Fed Declare Defeat and Move On?
If wages keep rising faster than productivity, the Fed will continue to struggle with inflation.
Inflation Adjusted, Men Are Making Less Money Than in 1979, Women Are Doing Better
Inflation adjusted, wages do not look so hot. For discussion, please see Inflation Adjusted, Men Are Making Less Money Than in 1979, Women Are Doing Better
I would like to see falling wages for all the economists at the Fed. If the Fed is one of the causes of inflation, then it makes sense that we should start there with deflation. On the plus side, maybe we will get less people willing to work for the Fed and they can either go wreak havoc somewhere else, or learn that a degree in the dismal science won’t pay off your student debt. Fingers crossed!
CL, crude oil futures, 1W : in a trading range since Dec 5 2022. Options :
1) Accumulation : CL in a sling shot up might breach 2008 high at 147 ==> inflation is breaking out.
2) Distribution : deflation.
I don’t think people understand the import of the data that Mr. Shedlock has posted.
Disinflation in New Hire Wages implies a lot of bad things.
1) Most marginal hiring occurs in small and medium businesses. Why are these businesses less and less able OR willing to pay the market clearing rate for labor?
2) What does this mean for the frictionally unemployed? If the bid falls below their ask, they’re more likely to become discouraged workers and fall out of the labor force.
3) Those already not participating in the labor force are even less likely now to re-enter, because the incentive to do so is going the wrong way. The discouraged becoming even more so.
4)What does this mean for opportunities for advancement among the employed? Again, discouraging prospects.
None of these things are hopeful for the economy moving forward. What will happen when the labor hoarding impulse that always occurs at downturns gives way to fatalism that the signs of recovery are too vague or far off to survive the cost of storing excess labor capacity on the payrolls? When that happens, those potential job cuts will realize their potential, and they will occur suddenly and over a very short time frame… and all hell will break loose.
Then The Fed will once again admit to being surprised by the markets, despite the fact there are warning signs everywhere.
Let me help you out a bit…
1) Hiring in small businesses doesn’t happen when they don’t have the money.
2) Folks become more incentivized as they become hungrier and colder.
3) Discouragement is a luxury of the affluent and the young. See also item #2.
4) You can’t keep a good and persistent man (or woman) down if they really want something bad enough.
But you do sound as though you consider yourself entitled.
Anything to do with the More Money Today, free lunch economics?
Pffft. There isn’t anything I ever have posted here that has anything to do with the Magical Money Tree cultists.
As for your responses:
1) Same answer I gave, albeit notably less broad
2) Government transfers prevent/ameliorate this
3) Yet the participation rate stands in stark contrast your theory here, see also item #2
4) What does the individual case have to do with the aggregate numbers we are discussing?
I think we are not so far apart after all.
If you want to learn about the value of the individual case versus aggregates read Dr. Steve Keen’s work on the fallacies of the currently prevalent neo-classical economics. Be careful, he is a post-Keynesian.
Covid is back in a new dress : EG 5 and FL 151. They hit impaired people who can’t produce sufficient Nitric Oxcide to protect themselves.
The CDC doesn’t report it, but more people are hospitalized. Face masks might be
mandatory soon.
I guess we all need to eat more of those magical beets. /sarc
Somebody mentioned UPS workers “scored big” on their new contract.
UPS wages for the top step went up 14.9% during the life of their last contract. BLS inflation during that time was over 21%.
The “huge win” they got doesn’t make up for the shortfall and if inflation runs over 3.5% for the next 5 years they will wind up losing even more to inflation.
Don’t worry.
These new wage contracts will bake more inflation into the cake for years to come.
Just like they did in the mid-70’s.
Lol… Are you Samuelson or Solow?
I have to say I’m sorta shocked to find a proponent of the labor theory of inflation on Mish’s site. Next, commenters will be bathing in the Phillip’s Curve.
Nope. Had just started a solo design/engineering consultancy and spent almost the entire 70’s watching it all happen from the sidelines. It took years to play out but it was entirely predictable. The frosting on the cake was the futile addition of wage and price controls which of course couldn’t work.
We haven’t learned anything. Except perhaps, to borrow more from the future and spend it now. The results of that are entirely predictable.
Just curious.
Were you running an independent small business through the 70’s?
No, thank the gods. I would never have the ego to think such a narrow pov would give me insight into the entire global economy. I try never to extrapolate from the particular to the general.
But, I’m willing to listen. Tell me how your 1970s experience of running your boutique business led you to become an advocate for the labor theory of inflation. And how those forces in the mid-70s so baked that inflation into the cake that inflation subsequently plummeted in 1982?
All while keeping in mind that inflation is always and everywhere a *monetary* event.
@Solon –
Yup, always a monetary event.
Especially so when Mr. Volker turned off the money spigot starting in 1980. And he kept the spigot closed until almost 1986. The inflation was built in as COLAs into union contracts – UAW, CRW, &c, &c.
Plummeted to 4% to 6% inflation?
In 1961 inflation was 0.67% and didn’t hit 2% until 1965.
Did you notice that COLAs were subsequently greatly reduced or eliminated? Except of course for Government employees.
FYI – With an EE major my minor was in economics, two schools. But I guess for you UofC wouldn’t count as it is not Sanders approved. Studying economics and geopolitical relations continue to remain my avocation as it has for many decades. Why else would I be here?
The results of borrowing and spending the children’s and grandchildren’s money is entirely predictable. The time of the endgame remains uncertain.
PS – Always liked boutiques as I found them much more interesting and challenging. Still do. Are you an apparatchik or in the nomenklatura?
5) Nixon high to Trump high.
1) Median real earnings (green) breached 1973 high in 2020. They are backing up
for over 3 years > Nixon high.
2) Women’s real earnings (brown) accelerated since 1981. Women earnings did the best.
3) Men’s (brown) hit nadir in 1995.
4) The gap between Men’s and women’s real earnings has been shrinking since 1981.
Great chart !
REAL wages have declined over 3% since the beginning of Covid. It’s just intellectually dishonest not to report that in any commentary or analysis of wages and inflation. Yes, wage increases are momentarily running higher than the inflation rate, but the clear evidence of falling wages for new hires is a clear sign that higher wage increases will likely be brief. Likely to be followed by layoffs, and numerous banks, hedge funds, and corporations whining for bailouts.
“REAL wages have declined over 3% since the beginning of Covid. It’s just intellectually dishonest not to report that in any commentary or analysis of wages and inflation.”
By any chance are you a new reader?
Here’s your “intellectual dishonesty”
https://mishtalk.com/economics/inflation-adjusted-men-are-making-less-money-than-in-1979-women-are-doing-better/
chart added – Few people have written more about real wages than me.
Co delay commissions, because customers are late payers, even with Net90days,
or Xmas terms and then ==> return goods for credit.
1) Step one : employers try to reduce the impact of high labor cost by recruiting new employees at lower wages, especially in the high tech sector, but it’s negligible.
Their profit margin might be shrinking.
2) Nominal wages per hour are still rising, though at a lower pace. The nominal wages
m/m are not negative.
3) Step two : the high tech industry might cut unprofitable/ marginal projects, trim headcount, in order to protect profit margin.
The Fed wouldn’t know inflation if it hit them in the face. They admitted this in the early 80s. In the midst of their panic over rates overshooting their target and hitting 17.5%, they admitted in their minutes: they didn’t know what money is, what the actual money supply is, or how to measure the volume of transactions in the market. They were desperate and had no idea what to do. But Volcker then lucked out with an oil supply shock that sent the economy into recession. A few years later, The Fed remade history, dumped the oil shock down the memory hole, and took credit for the recession as “inflation fighters.”
So they’re limited to their models and their pop psychology expectations theory. Of course, no real financial player is swayed by their ridiculous expectations theory because The Fed has been proven wrong so many times. You can’t generate self-fulfilling prophecies if the narratives continuously fail to deliver. The market players have been burned far too often over the past 15 years to believe a word of it today. Like from 1930-90, The Fed is once again ignored.
Notice the secular highs on the wage chart before the Dotcom Crash and the GFC? Fed’s models didn’t work then either and saw inflation where it wasn’t. Does no one remember The Fed blindly hiking into the GFC? Someone should really teach them the basic economics of supply and demand curves and what supply shocks really are. You have to let markets work out these shocks through true price discovery. Which is not frigging inflation.
And they are going to continue their “inflation fighting by psychology” while ignoring the liquidity crisis (in other words monetary crisis) and deflationary pressures rippling through global markets. People think each nation’s economy is an “island”, somehow separate and segregated from the rest of the world. Nothing could be farther from the truth. Just ask China who at least attempts to maintain that segregated island, but is failing badly as they become dollar starved in this monetary famine.
The question shouldn’t be about inflation with the money supply deflating so hard globally. Rather, it should be “How many adverse, destabilizing credit events are we going to have in September and October? How many banks or institutions will fail?”
And the BLS promptly revises March payrolls down 300k after getting the QCEW data. BLS is aware (and warns) that their models are inaccurate at transitions in the economy, resulting in serial downgrades. Which is precisely the environment we are in. That March number will get revised down again in January, as will all the other months. So very clearly “not-inflation”.
This is why reporting on economic data usually subject to major revisions should be release delayed by say, 3 months.
I once worked in a sales job where commissions were delayed 3 months due to a few past reps getting into situations that resulted in sales revisions and chargebacks on commissions.
I think the lack of understanding of high frequency data lies with the user not the producer. BLS is clear on the limitations of their high frequency series. Limitations that are ignored by the media who have yet to find a datum they couldn’t mis-report. Such is Clown World.
Wages are NOT falling as your title states…they are rising at a slower rate, relative to recent past…….I know what you meant…but these are the types of things that people will begin to state and it is NON_FACTUAL…. Wage GROWTH has slowed….
You seem to have a reading problem. Let me help. Wages for New Hires are Falling, But the Impact is Negligible
“Among postings for more than 20,000 job titles on ZipRecruiter’s site this year, the average pay for a majority of roles has declined from last year. Some of the steepest drops have been in technology, transportation and other sectors that experienced frenzied hiring sprees in 2021 and early 2022.”
If you have one foot in the oven and the other in the freezer, on AVERAGE, you might be at a comfortable temperature.
Interesting wages for new hires decreasing when wages for experienced hires are accelerating, per data published a couple days ago.
https://wolfstreet.com/2023/08/21/powells-inflation-nightmare-job-seekers-incl-the-employed-suddenly-expect-massively-higher-wages-in-job-offers/
With about 130,000 people being added to the social security rolls monthly we can assume that at least 130,000+ people are “retiring” every month. That’s a lot of skilled labor leaving the labor force and not enough to replace those leaving so yeah wages for skilled/experienced people will only go up and the Fed can’t do anything about it.
Pilots for American and United recently scored 40% raises, UPS union workers just scored big on contracts. The fight for labor will intensify over the next 7 years as millions more boomers hit the socialism queue.
source: https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/
Wage demands hit record high: Average job seeker wants at least $78k
Ivana Saric
22 Aug 2023
U.S. workers on the job hunt currently harbor record-high wage expectations, with men expecting significantly more money from job offers than women, according to a new Federal Reserve Bank of New York survey.
…
https://www.axios.com/2023/08/22/salary-expectations-wages-rising-american-pay
so it’s 10,000 PER DAY retiring – ie 65