In a resounding signal that the heat of inflation has truly permeated the labor market, workers’ expectations for acceptable job offers have soared to unprecedented heights. The current economic landscape is abuzz as the latest New York Federal Reserve employment survey, freshly unveiled on Monday, reveals a remarkable surge in the average “reservation wage.” This wage threshold, deemed the minimum acceptable to entertain a job transition, has skyrocketed to a remarkable $78,645 during the second quarter of 2023.
This surge marks an impressive 8% leap from a mere year ago and stands as the zenith of a data series that dates back to the inception of 2014. The icing on the cake is the astounding 22% surge this figure has experienced over the past three years, encapsulating the era dominated by the disruptive forces of the Covid-19 pandemic.
The significance of this figure lies in its reflection of wages as a potent driving force in the relentless inflation narrative. While the storm of elevated goods prices may have subsided since catapulting overall inflation to its highest point in over four decades back in mid-2022, other factors persistently elevate it beyond the Federal Reserve’s coveted 2% target.
Coinciding with this revelation is the congruence between New York Fed data and the Atlanta Fed’s own tracking mechanism. The latter showcases an overall 6% annual uptick in wages, with job switchers reaping even higher rewards at an impressive 7%.
In the struggle to meet the ascending demands for wages, employers have been engaged in a tug of war, propelling the average full-time job offering to a staggering $69,475. This colossal surge reflects an extraordinary 14% escalation in the past year alone. The practical expected annual salary is no exception to the upward trend, crossing the $67,416 threshold with a substantial gain exceeding $7,000 from a year ago.
While a disparity persists between the desired wages and the reality of offered packages, there’s an overarching wave of satisfaction with compensation and the allure of upward mobility that sweeps across the spectrum.
As the financial markets teeter on the edge, eagerly speculating about the Federal Reserve’s next policy move, the prospect of a tight labor market raises the likelihood of policymakers maintaining heightened interest rates for an extended period. In the aftermath of their July meeting, officials underscored the fact that wages “continued to rise at rates above levels assessed to be consistent with the sustained achievement” of the 2% inflation target, as meticulously recorded in the meeting’s minutes.
Unveiling the nuances of the labor market, Monday’s survey findings paint a mixed picture. The tribe of job seekers, comprising those diligently scouting opportunities within the past four weeks, witnessed a decline from 24.7% to 19.4% year over year. This occurred in tandem with a substantial 738,000 drop in job openings, as officially reported by the U.S. Bureau of Labor Statistics, ultimately clocking in at 9.58 million.
Moreover, the propensity to switch jobs witnessed a retreat, dwindling from 11% to 10.6% in comparison to the preceding year. Simultaneously, expectations of being embraced by new job offers also underwent a slight slump, sliding from 21.1% to 18.7%, creating a multifaceted tapestry of labor market dynamics.
