Friday's Labor Department report stated that wages rose 1.5% in the third quarter. This is a sharp increase from the 0.9% reported in the previous quarter. The July-September quarter saw a 0.9% increase in benefits, which was more than twice the amount recorded in the three preceding months.
For the first time in over two decades, workers have the upper hand on the job market. They are getting higher wages, better benefits, and more flexibility. According to government data, there are more jobs than unemployed people so businesses have had to work harder in order to hire staff.
While wage increases are being eroded by higher inflation, overall pay has risen with rising prices in recent months. Economists stated that the 1.5% increase in wages is more than the 1.2% inflation increase during the same period.
It's still a better result than a year ago. Wages and salaries saw a 4.2% increase in September, a record. The government reported Friday that prices rose 4.4% in September compared to a year earlier. Inflation was 3.6% last year, excluding volatile food and energy categories.
Jason Furman, an ex-top economic advisor to President Barack Obama, stated Friday that inflation-adjusted earnings still trail their prepandemic levels, due to the huge price jumps that took place over the spring and early summer for new and second-hand cars, furniture, as well as airline tickets.
How much workers receive from higher wages will depend on whether inflation declines in the next months.
Many economists predict that inflation will slow down, but wages will continue to rise.
The recovery from the pandemic recession has seen pay rise much faster than the recovery from 2008-2009's Great Recession, which saw wage growth slow down for a year until the end of that downturn. This is due to the differences in the nature of both recessions and different policy responses.
There was more government stimulus after and during the pandemic recession than the previous one. This includes the $2 trillion financial assistance package signed by former President Donald Trump (March 2020) and the $1.9 trillion in federal aid approved by President Joe Biden (March 2019). Both packages included stimulus checks and increased unemployment benefits, which fueled higher spending. I reduced what came after "spending".
The biggest gains were for lower-paid workers, with wages rising by 8.1% in the 3rd quarter compared to a year ago. Retail workers saw a 5.9% increase.
Konczal stated that the stimulus checks and $300 per week in additional jobless benefits gave those who were out of work more leverage to negotiate higher wages. The Fed's low interest rate policies also helped to increase spending and raise the demand for workers.
August saw 10.4 million jobs, a decrease of 11 million in July. This was the lowest number in 20 years.
Millions of Americans are taking action to lower wages and leaving their jobs in order to find better-paying work. A record 3% of American workers left their jobs in August, which was almost 3%. Companies must also raise wages to retain their workers because of the higher rate of quitting.
The highest income gains for workers who change jobs are being recorded in many decades. According to the Federal Reserve Bank of Atlanta in September, job-switchers saw their salaries rise 5.4% compared to a year ago. This is an increase of 5.4% compared to 3.4% in May, and the largest increase in almost 20 years. Pay rose 3.5% for those who kept their jobs.
Esther Cano (26 years old) is one of the many who got a better job in the July-September quarter. Recent college graduate, Esther Cano, 26, left her job as a dispatcher for an HVAC company in Fort Lauderdale, Florida to take a position with Robert Half. She began in July and was given a raise of 10%.
Cano stated, "What I requested was lower than what they were willing pay." It was an easy decision on this end.
Cano was promoted to team leader, which allows her to place temporary workers in accounting and finance.
Economists predict solid wage growth in the next few months. According to data from Indeed, employers still post a large number of jobs.
Inflation can be fueled by higher pay, which means companies will raise prices to compensate for their increased costs. Businesses can also respond in other ways. Oxford Economics economist Lydia Boussour notes that corporate profits reached their highest point in almost a decade in the April-June quarter. This suggests that many companies are able to pay higher salaries and not have to raise prices.