And as employers have followed the new reality, the actual wages offered by job seekers have risen significantly.
By Wolf Richter of Wolf Street.
Wages for job offers received by job seekers and wage expectations for job seekers soared in July. This is another sign that this inflation is having an impact on the labor market and, in fact, is not receding at all. I’m starting to worry that a big rise in wages will lead to even higher inflation.
According to the New York Times, the wages job seekers (including those who are unemployed as well as those looking for another job) expect to get a job offer are up $7,105, or 11.8%, from a year ago. and averaged $67,400. The Fed’s Consumer Expectations Survey (SCE) released this morning. This portion of the SCE is conducted three times a year, in July, November and March.
This was the largest jump in job wage expectations in SCE’s data going back to 2014. Evidently, job seekers are feeling encouraged and pedaling hard towards wage expectations.
Employers are still struggling to find suitable employees, but appear to be working together to hire talent. According to SCE, the average full-time wage for job openings actually received by job seekers rose $8,711, or 14 percent, from the same month last year to a record $69,500 in July.
The minimum wage, or average reservation wage, that job seekers would accept to land a new job rose 7.9% year-on-year to $78,600.
These are a huge increase in what job seekers expect and what job seekers offer. And it did so in a still-unfolding scenario in which trade unions demand much higher wages and are willing to take labor action to underscore their demands. States, counties, and cities with minimum wages have also raised them, and in some cases, by a large amount.
Therefore, in July, the actual average hourly wages of “production and non-managerial employees”, which account for the majority of total employment, accelerated sharply, rising by 0.45% from June, and by November from the previous month. It was the largest increase of 5.5% since then. Increases at an annualized rate. This is based on a survey of employers by the Bureau of Labor Statistics that we discussed earlier in August.
Inflation has various factors that drive it. That includes factors related to what I call the popular sentiment, the inflationary mindset of businesses and consumers, which continues to drive higher prices. How these factors interact is surprisingly still poorly understood. And because they are not well understood, we are experiencing such constant ‘surprises’ with inflation.
One aspect of these inflation drivers is wage surges that are out of line with productivity gains. This has alarmed inflation watchers, who fear a new “wage-price spiral” could erupt. In the past, wage price spirals have proven painful and difficult to control.
In his press conference, Fed Chair Powell continued to point to wage growth as a factor in service inflation soaring to 6.2% as service providers pass on high labor costs.
Another aspect of wages and inflation is more general. Those who make more money can pay higher rents, but landlords figured that out long ago. That way, landlords can pay more for the services they need. And workers with higher wages can pay more for other products and services. And when the inflationary thinking kicks in, they think they’re going to make more money, or they’re willing to pay more because they’ve already gotten a big boost, but now it’s all part of the flow. And now suddenly we’re seeing very high offer wage expectations.
Read, enjoy, and support Wolf Street? You can donate. I appreciate it very much. Click beer and iced tea mugs to find out how.
Want to be notified by email when new articles are published on WOLFSTREET? Sign up here.