The median salary gains for job switchers dipped to 9% in September, the lowest rate of rise since June 2021, according to data released by ADP on Wednesday. At their height, workers’ average annual wage gains were about 16%, more than twice the rate of those who stayed on the job.
But according to data released on Wednesday, the gap between salary increase achieved by quitting a job and staying in it is now as narrow as it has been since October 2020.
According to a news statement from ADP, chief economist Nela Richardson, “we are seeing a steepening decline in jobs this month.” Additionally, during the past 12 months, earnings have been steadily declining.
According to the ADP National Employment Report, the US economy added 89,000 private payroll jobs in September. Bloomberg questioned economists who predicted 150,000 new jobs will be added for the month. The latest Job Opening and Labour Turnover Survey, or JOLTS report, which reported an unexpected increase in job opportunities in August, marked the beginning of a busy week for labour market news.
Stocks fell as a result of the report’s unexpected headline because investors were concerned that a robust economy may signal additional interest rate increases from the Federal Reserve. However, there were hints that the economy was cooling in the fine print.
The hire rate in August was 3.7%, steady from the month before and below its pre-pandemic level after years of aggressive hiring in a hot labour market. Additionally, the quit rate remained constant in August at 2.3%, down from the record high 3% reported in April 2022. This indicates that fewer people are looking for opportunities outside of their current workplace.
Wells Fargo senior economist Sarah House noted in a research note on Tuesday that “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.” As companies have fewer positions to fill, the decreased rate of voluntary departure “should further reduce wage pressures and job openings.”
It is likely that the Fed would welcome an indication of easing wage pressures in its fight against inflation. Jerome Powell, the chair of the Federal Reserve, has argued repeatedly that maintaining the trend of falling inflation requires a rebalancing of the labour market, including a better balance between the supply of jobs and the demand for workers. An element of the improved balance is greater typical pay growth.
Powell stated during his lecture at the Jackson Hole Symposium that nominal wage growth must eventually decline to a rate that is consistent with 2% inflation.
On Friday, additional labour market data is anticipated. According to the September jobs report, 170,000 new jobs were added to the economy in September, which is somewhat fewer than the 170,000 jobs added in August. The unemployment rate is also predicted to decrease from 3.8% to 3.7%.
Another look at wages, a frequently studied indicator of the bargaining power of workers in the labour market, will be provided in the report. In September, wages are anticipated to have increased by 0.3% on a monthly basis, up from 0.2% in August. Economists continue to forecast annual pay growth of 4.3%, which is unchanged from August.