Workers who stay in their jobs are receiving the biggest pay raises in decades as companies compete to retain a limited number of employees.
Wages for employees who remained in the same job climbed 5.5% in November from the previous year, according to new data from the Federal Reserve Bank of Atlanta. That marks an increase from 3.7% in January 2022 and the highest increase since the bank began tracking wage data 25 years ago.
Meanwhile, workers who switched jobs saw even bigger gains of 7.7% in November, according to the Atlanta Fed.
The extremely tight labor market has allowed workers to quit their jobs in favor of better wages, working conditions and hours – a new trend dubbed the “Great Resignation.” The Labor Department reported last month that employers had 10.3 million positions open at the end of October, meaning there are roughly 1.7 posted jobs for every unemployed worker.
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The number of available jobs has topped 10 million for 12 consecutive months; before the pandemic began in February 2020, the highest on record was 7.7 million.
The concern among some economists is that higher wages are keeping pressure on stubbornly high inflation, which climbed 7.1% in November from the previous year, according to the Labor Department.
“The labor market remains tight and overheated,” said Joe Brusuelas, RSM chief economist. “Competition for a labor inside a workforce that is now shrinking supports higher wage gains, which is feeding into elevated inflation across the economy and inside the service sector.”
Despite the wage increases – and the possibility of a record-high hike in 2023 – headline inflation is still wiping out the majority of Americans’ paychecks.
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The Labor Department reported that average hourly earnings for all employees actually declined by 1.9% in November from the same month a year ago when factoring in the impact of rising consumer prices. On a monthly basis, average hourly earnings ticked up by 0.5% last month when accounting for the 0.1% monthly inflation spike.
By that measure, the typical U.S. worker is actually worse off today than a year ago, even though nominal wages are rising at the fastest pace in years.
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Scorching-hot inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent.
The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily impacted by price increases.