WASHINGTON – In the three months to the end of September, wages surged the biggest jump on records dating back 20 years, a striking illustration of the growing ability of workers to demand higher wages from companies desperate to fill a near-record number of jobs available.
Wages rose 1.5% in the third quarter, the Labor Department said on Friday. This is up sharply from 0.9% in the previous quarter. The value of benefits increased 0.9 percent in the July-September quarter, more than double the previous three months.
Workers have taken over the job market for the first time in at least two decades, and they are demanding higher wages, more benefits and other perks like flexible working hours. With more jobs available than there are unemployed, government data shows companies have been forced to work harder to attract staff.
Higher inflation eats away at some of the pay increases, but in recent months total compensation has kept pace with rising prices. The 1.5% increase in wages and salaries in the third quarter is ahead of the 1.2% increase in inflation during this period, economists said.
However, compared to a year ago, it’s a tighter call. In the year ending September, wages and salaries climbed 4.2%, also a record gain. But the government reported on Friday that prices rose 4.4% in September from a year earlier. Excluding the volatile food and energy categories, inflation was 3.6 percent last year.
Jason Furman, former senior economic adviser to President Barack Obama, said on Friday that inflation-adjusted wages are still below their pre-pandemic levels, given the sharp price hikes in the spring and summer for new and used cars, furniture and airline tickets. .
Lower inflation over the next few months will determine the extent to which workers benefit from higher wages.
Many economists expect inflation to slow down a bit, while wages should continue to rise.
Wages rise much faster during the recovery from the pandemic recession than during the recovery from the Great Recession of 2008-2009, when wage growth continued to slow for up to a year after that recession ended. This is due to the different nature of the two recessions and the different policy responses.
There have been many more government actions during and after the pandemic recession compared to the previous one, including the $ 2 trillion financial support plan signed by former President Donald Trump in March 2020 and aid from $ 1.9 trillion approved by President Joe Biden in March. Both packages provided stimulus checks and improved unemployment benefits that fueled increased spending.
The lowest-paid workers made the biggest gains, with wages for employees in restaurants, bars and hotels rising 8.1% in the third quarter from a year earlier. For workers in the retail trade, it jumped 5.9%.
The healthy increase for disadvantaged workers “is the result of specific policy choices aimed at giving workers better bargaining power and ensuring a faster recovery of the economy,” said Mike Konczal, director of the left-wing Roosevelt Institute . “The fact that this is happening is quite unique.”
The stimulus checks and an additional $ 300 a week in unemployment benefits, which ended in early September, gave unemployed people more leverage to demand higher wages, Konczal said. In addition, the Fed’s low interest rate policies have helped stimulate spending, increasing demand for workers.
In August, there were 10.4 million jobs available, up from 11 million in July, which was the highest in two decades.
Millions of Americans are responding to rising wages by quitting their jobs for higher paying positions. In August, nearly 3% of American workers left their jobs, a record. A higher number of quits also means that companies must increase wages to keep their employees.
Workers who change jobs have some of the biggest earnings gains in decades. According to the Federal Reserve Bank of Atlanta, in September, people who change jobs saw their wages increase 5.4% from the previous year. This is up from just 3.4% in May and the biggest increase in almost 20 years. For those who stayed in their jobs, wages rose 3.5%.
Esther Cano, 26, is among those who found a new, better-paying job in the July-September quarter. A recent college graduate who is not yet sure of her long-term career path, she quit a job as a dispatcher at an HVAC company in Fort Lauderdale, Fla., For a job at the employment agency. Robert Half. It started in July and got about a 10% increase.
“What I was asking was less than what they were willing to pay,” Cano said. “It was obvious on that side, plus the environment, the possibility of growth, the opportunity.”
Cano has already been promoted to a team leader position, where she helps place temporary employees who work in finance and accounting.
Most economists expect solid wage gains to continue over the next few months. Data from Indeed’s job website shows that employers are still posting a large number of available jobs.
Higher wages can fuel inflation as companies raise prices to cover their increased costs. But that’s not the only way businesses can respond. Lydia Boussour, an economist at Oxford Economics, notes that corporate profits in the April-June quarter were at their highest level in nearly a decade. This suggests that many companies can pay higher wages without having to raise prices.
By CHRISTOPHER RUGABER Writer in economics of AP