Workers change jobs, reap big raises and keep inflation high

About 64% of job changers said their current job paid better than their previous job. Of those workers, nearly half received a raise of 11% or more, according to a ZipRecruiter survey provided exclusively to The Wall Street Journal. Nearly 9% now earn at least 50% more.

High job-switching rates could continue: among prime-age workers aged 25-54, around 20% plan to leave within a year, while 26% said they were planning to stay one to two years, according to the survey. Historically, the average job lasts four years, said Julia Pollak, chief economist at ZipRecruiter.

Employment change is a key driver of the broader wage growth that has developed as the economy rebounded from the Covid-19 pandemic. Workers who change jobs often get bigger wage increases, and employers are also raising wages to compete to keep existing workers, economists say. Annual wage growth for the typical worker reached 6% in March, a three-month average, according to the Federal Reserve Bank of Atlanta’s wage tracker. This represents an increase from 3.4% a year earlier and above the 3.7% rate in February 2020, before the pandemic, when the unemployment rate was at its lowest level in 50 years.

The consumer price index rose 8.5% in March from a year earlier, according to the Labor Department, the highest annual inflation rate since 1981. Widening wage gains in the whole economy could keep inflation high over the next few quarters, even if dynamics such as supply chain disruptions and energy shortages fade.

“It’s great to get wage gains, but not if it pushes up inflation further,” said Diane Swonk, chief economist at Grant Thornton.

Nearly 27% of economists polled by The Wall Street Journal in April said wage growth was the biggest inflation risk this year, a higher share than those citing the Russia-Ukraine war and supply chain disruptions. supply as the main inflationary threats. Firms pay more to attract and retain workers in a competitive labor market and will have to pass on price increases to compensate, the thinking goes.

The momentum poses a challenge for the Federal Reserve, which in March began raising rates for the first time since 2018. The central bank is trying to bring inflation back from a four-decade high closer to its 2% target .

Wage growth was weak in the years following the 2007-09 recession, even as unemployment fell to historic lows. Some economists have argued that this was because workers were reluctant to change jobs. Today, workers are quitting at rates far higher than before the pandemic, receiving large pay increases.

That includes employees like Dain Laguna, 37.

Last year, Mr. Laguna worked in human resources at a home improvement company, feeling undervalued at a $19 hourly wage. Rising inflation began to eat away at his already tight budget. For example, the prices of fresh organic food – which he prefers to give to his children – have become a financial burden.

“My cup still isn’t overflowing, but I don’t feel like I’m drowning anymore,” says Dain Laguna, who works here from his home in Lexington, North Carolina.


Photo:

Kate Medley for The Wall Street Journal

“I am a father of two children and I cannot work for pennies,” said Mr. Laguna. “Things are expensive these days.”

Higher costs and a lack of upward career mobility prompted him to revamp his LinkedIn profile and start applying for jobs last fall. He landed a new role in human resources, which he started in February. In his new position, Mr. Laguna helps workers get into information technology jobs at large companies. Recruiters continue to contact Mr. Laguna to gauge his interest in new jobs because human resources workers are now in high demand, the Lexington, North Carolina resident said.

Mr. Laguna earns the equivalent of about $28 per hour, about 50% more than in his previous role. “My cup still doesn’t overflow, but I don’t feel like I’m drowning anymore,” he said. “I make enough money now, if a random $250 car repair bill comes in, that’s good; this is not a problem. I don’t have to go into debt.

About 2.9% of workers left their jobs in February, well above the February 2020 pre-pandemic rate of 2.3%, as workers are confident in their job prospects. The majority of workers who quit last year and have not retired say they are in full- or part-time positions, according to a Pew Research Center survey released in March.

The so-called quit rate appears to be peaking, a possible sign that the labor market is cooling slightly. Still, increased resignations translate into wage gains with a lag, so even if resignations plateau in the coming months, wages may continue to rise for some time, said University researcher Alex Domash. from Harvard.

“But even at current levels, wage growth is inconsistent with the Fed’s inflation target,” Domash said, adding that the current rate implies sustained inflation above 5%.

ZipRecruiter’s survey, which was conducted in February, was conducted among 2,064 US residents who had started a new job in the past six months, and does not necessarily reflect overall labor market dynamics. There is no direct historical data for comparison. However, the data offers a picture of workers’ bargaining power that has the potential to expand.

“Companies facing fierce competition for scarce talent have been pressured to raise wages, ease job requirements, expand benefits and offer more favorable terms of employment,” Ms Pollak said. . Some 37% of recent new hires had been recruited by their employer and nearly 22% said they had received signing bonuses, according to the ZipRecruiter survey.

The share of employed job seekers expecting their current employer to pay a higher salary if they quit rose to 54% in March, from 43% in January, according to a separate monthly survey by ZipRecruiter.

Annual wage growth for the typical job change was 7.1% in March, a three-month average, up from 4% a year earlier and the fastest pace since records began in 1997, according to the Atlanta Fed data. These wage pressures ripple through everyone as employers compete to retain staff. Wage growth for those who kept their jobs rose 5.3% in March, near the fastest pace since at least 1997.

“As soon as an employer is scared that people are leaving, they’re going to give everybody raises,” said Guy Berger, senior economist for LinkedIn, the professional social network. “So even though the unemployment rate is lower, it’s still up a ton.”

Write to Gwynn Guilford at [email protected] and Sarah Chaney Cambon at [email protected]

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