In a marked shift from previous trends, data from ADP reveals that the median year-over-year pay increase for job switchers dropped to 9% in September, representing the slowest rate of growth since June 2021. This stands in stark contrast to the 16% year-over-year pay increases witnessed by average workers at its peak. Nevertheless, even the most sluggish wage gains remain noteworthy, especially when considering that median weekly earnings only saw a modest 2.6% increase in the third quarter, according to a report by payroll firm SurePayroll.
The ADP National Employment Report delivers further somber news for the US labor market, indicating that a mere 89,000 private payroll jobs were added to the economy in September. Economists surveyed by Bloomberg had anticipated a more robust figure of 150,000 for the month. This report arrives amidst a flurry of labor market updates, commencing with the latest Job Opening and Labor Turnover Survey (JOLTS), revealing an unexpected uptick in job openings in August. However, it also spotlights a concerning detail. Despite years of robust hiring in a flourishing labor market, the hire rate remained stagnant at 3.7% in August, mirroring the preceding month and remaining below its pre-pandemic level. Likewise, the quit rate remained unchanged in August at 2.3%, down from the historically high 3% observed in April 2022, indicating a reduced inclination among workers to seek opportunities beyond their current employment.
Economists posit that the sluggish wage gains and low labor turnover rate signify a recalibration of the market in the post-pandemic landscape. According to senior economist Sarah House of Wells Fargo, “The improved rate of retention comes as the pay premium for switching jobs has narrowed and a declining share of workers view jobs as plentiful.” In this light, a moderation in wage growth would align favorably with the Federal Reserve’s battle against inflation. Fed chair Jerome Powell has emphasized the necessity for nominal wage growth to slow down to a pace consistent with 2 percent inflation.
The eagerly awaited September jobs report, scheduled for release on Friday, is expected to provide comprehensive data on wages. Economists anticipate an uptick of 0.3% in hourly wages for September, equating to a 4.3% annualized increase. It is evident that the days when changing jobs reliably led to substantial pay hikes are behind us. In the current landscape, job changers must carefully weigh the costs and benefits of making a switch. This underscores a prevailing truth in the post-pandemic market: new opportunities may not yield the financial rewards they once did. While wage growth is certainly a welcome development, the ongoing deceleration in job gains warrants a measure of caution.
Source: Yahoo Finance