Wages are falling for new hires, but that won’t appease the Fed.

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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

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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

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Data from BLS, chart by Mish

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. Nearly every month, wages are rising at an annualized rate, of at least 4.5 percent, in nominal terms.

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.

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