A New York Federal Reserve Bank study found that workers’ demands for more money on the job reached a record high

Fewer workers are looking for jobs, and satisfaction among workers is rising, but those aren’t the main findings from the New York Fed’s latest data on a labor market that’s still too hot for the central bank to take comfort in fighting inflation. Workers expect more money on the job than ever before.

The lowest median wage Americans are willing to accept for a new job rose from $72,873 in July to $73,667 in November, the highest reading ever in the Federal Reserve Bank of New York’s labor market survey of microeconomic center SCE, which was released on Monday. The level surpassed the record $73,283 reached earlier this year in March, which it recently fell below. The increase was most pronounced for respondents under the age of 45.

The expected average annual salary for job offers also rose in the next four months, from $60,310 in July to $61,187 in November, also a record high for the survey, surpassing the mark set in March 2021.

The New York Federal Reserve releases this data online every four months as part of its Survey of Consumer Expectations (SCE) and released its most recent annual revision of the data in August.

The data is not surprising. Even as the economy slows and risks of a recession mount amid slower rates of business investment and waning consumer demand, Federal Reserve Chair Jerome Powell delivered a message during last week’s FOMC lobbying conference that resonated in C-suites across the economy: The job market remains very hot and growth is growing. Wages are very high.

Signs of rises above 4% again in 2023 came from compensation advisors and illustrate why labor market strength is a bigger issue for the Fed than consumer prices as reflected in the recent CPI cooling.

Even in Silicon Valley, where layoffs have been concentrated, CFOs say the labor market remains brisk and there will be no return to the 3% budget increase for 2023. Inflation has fallen, but employee expectations remain high for increases as they lose purchasing power. .

Continued strength in the labor market will put pressure on companies to continue to use price as a tool to make up some of the lost margin in labor costs.

This is important, because it raises the risk of a wage-price spiral that is one of the Fed’s biggest concerns in combating inflation, a cycle in which wages rise in response to prices and prices rise in response to wages.

In some industries, recent gains by union workers in annual salary, as high as 7% in some cases, will lead to additional pressure from white-collar workers for bigger raises. Hot job market Increases are set to remain above 4% in these sectors, a challenge compounded by the concentration of operations in some metro areas where the overall job market remains strong.

Some companies will choose to offer one-off bonuses, which have become more popular over the past few years as a way of acknowledging the inflationary pressures felt by workers. This approach to offering more wages does not tie them to salary increases that cannot be easily reversed, nor does it influence the trend of wage inflation for a prolonged period.

But for now, Powell is stuck in a job market that is not rolling back Fed policy as quickly as hoped. That could change quickly, and in previous downturns, a handful of layoffs — so far concentrated in technology but spilling over into other sectors — could turn into a flood faster than the Fed’s reactionary job. Financials in Conversations with CNBC One difference between hopes for a soft landing for the economy and the reality of a hard landing coming sooner than the Fed can adjust policy.

As inflation decreases, the Fed looks at three areas: commodity inflation, past food and energy, which are declining; housing inflation, which is declining (rent growth is slowing at least), but will decline slowly; The third, and arguably most important, inflation for basic services remains stubbornly high and where the labor market is key.

“We see a very, very strong job market, a market where we haven’t seen a significant downturn, where job growth is very high, where wages are very high. So it’s likely that that part of it, which is the biggest part, that takes a long time to come down,” Powell said of service inflation. .

That’s the big question for the Fed – in Powell’s own words.

“The big question is, when — how much of the larger, 55 percent of the index you’ll see, which is the non-residential services sector. And, you know, that’s where you need to see — we think you need to see a better balance between supply and demand in the labor market so that you have – It’s not that we don’t want wage increases. We want strong wage increases. We just want them to be at a level that corresponds to an inflation rate of two per cent. Right now – if you put into account – if we consider productivity estimates, benchmark productivity estimates, And wages are running, you know, way above what would correspond to a 2 percent inflation rate,” he said.

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