Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Where Your Raise Goes When Job Openings Surge
Transcript
- Lucas: Luna, there are two numbers from this week that I cannot square. Job openings surged to 7.6 million in April — highest in nearly two years. But average hourly earnings barely budged — up just 0.13 percent month-over-month. Luna: That is the weirdest disconnect in this labor market. More vacancies should mean more competition for workers, which should push wages up. But the data says otherwise. Lucas: Right. The standard story is that when employers are desperate to hire, they bid up pay. And that did happen in 2021 and 2022. But this cycle feels different. The JOLTS report — the Job Openings and Labor Turnover Survey — came out Tuesday. 7.6 million openings. That's above the pre-pandemic peak. Luna: So why aren't workers cashing in? Let me guess — it's about where those openings are. Lucas: Exactly. The mix matters. Nearly half of the new openings are in healthcare and hospitality. Those are sectors with traditionally lower wages and thinner margins. A hospital system might post 500 nursing vacancies, but they're constrained by Medicare reimbursement rates. A restaurant can't pay line cooks fifty dollars an hour because the customers won't pay thirty dollars for a burger. Luna: Meanwhile, white-collar hiring is flat. Tech, finance, professional services — those job postings have been range-bound for months. So the high-wage openings aren't really growing. Lucas: That's the first piece. The second is what economists call the 'job-switching premium' — the extra raise you get when you leave your current employer for a new one. Historically, that premium has been around 5 to 7 percent. In 2022, it peaked at nearly 8 percent. But the Atlanta Fed's Wage Growth Tracker now shows it's down to about 4 percent. Luna: So even if you switch jobs, you're getting a smaller bump. That reduces the pressure on current employers to raise wages to keep you. Lucas: Exactly. The quit rate has also fallen. It was 2.8 percent in April, down from 3.0 percent a year ago. Fewer people are leaving jobs voluntarily, which means less churn, less bidding war. The labor market is tighter in terms of openings, but looser in terms of actual worker mobility. Luna: It's almost like the openings are a mirage. They're there on paper, but they don't translate into leverage for the average worker. Lucas: I think that's the right frame. The other factor — and this is the one that ties back to our wage vs price theme — is that inflation is still running at about 3.2 percent, if you look at the April CPI. So even if you get a 4 percent raise by switching jobs, you're only gaining 0.8 percent in real terms. That's not nothing, but it's not the kind of life-changing bump workers saw a few years ago. Luna: And for people who stay put? Average raises for job-stayers have been hovering around 3.5 percent. After inflation, that's basically flat. Lucas: Which is why you hear so many people say 'my raise felt like nothing.' Because it literally bought them nothing extra. Now, I want to spotlight one specific industry where the dynamic is actually different: manufacturing. The employment cost index for manufacturing wages rose 4.2 percent year-over-year in the first quarter. That's above the overall private sector average of 3.8 percent. Luna: Because of reshoring and the Iran war pushing up domestic production demand. Lucas: Exactly. The U.S. is producing more at home — partly due to tariff policies, partly due to supply chain realignment. So factory workers have genuine bargaining power right now. But that's a relatively small slice of the workforce. About 8.5 percent of private employment is in manufacturing. Luna: So the big picture is: 7.6 million openings sounds like a booming labor market. But when you peek under the hood, it's mostly low-wage vacancies and a shrinking job-switching premium. The headline number doesn't tell the story. Lucas: And that's the problem with relying on a single data point. The JOLTS number made headlines — 'Job openings surge to 7.6 million!' — but the wage data tells a quieter story. The average hourly earnings number I mentioned earlier, $37.40 as of April, is up only 3.9 percent year-over-year. That's actually slower than the 4.2 percent we saw in the fourth quarter of last year. Luna: Wage growth is decelerating even as hiring demand appears strong. So what does that mean for the Fed? Lucas: Good question. The FOMC meets next week. The Fed has been watching wage growth as a potential driver of services inflation. But if wages are cooling while openings are high, it suggests the labor market is rebalancing without overheating. That's actually the soft landing scenario they've been hoping for. The 10-year breakeven inflation rate is at 2.38 percent, down slightly from 2.39 — so bond markets are pricing in stable inflation expectations. Luna: Still, for the worker at home, the experience is that prices are higher, and their raise didn't keep up. Even if the macro numbers look okay, the micro feels lousy. Lucas: And that's why we do this show — to connect the dots between the abstract data and the lived reality. If walking through the economy with us has made something click, it helps to know that listener support keeps this podcast ad-free. You can help at buy me a coffee dot com slash fexingo. No pressure, but it does mean a lot. Luna: Yeah, it really does. And it lets us keep drilling into numbers like these without any sponsor influence. Lucas: So back to the job-switching premium. The Atlanta Fed data shows that the premium peaked at 7.7 percent in mid-2022. Now it's around 4 percent. That's a huge compression. And it suggests that the era of 'Great Resignation' style bargaining power is over. Workers who want a meaningful raise today may need to look beyond just switching jobs — they might need to switch industries altogether. Luna: Which is a big ask. Not everyone can retrain for healthcare or manufacturing. But those are the sectors where wage growth is actually outpacing inflation. Lucas: Right. And that's the uncomfortable truth this episode leaves us with. The labor market is strong in aggregate, but the distribution of that strength is uneven. For the typical worker, 7.6 million openings don't feel like opportunity — they feel like a headline that doesn't match their paycheck. Luna: So the next time you see a big JOLTS number, ask: where are those jobs, and who's actually getting the raise? Lucas: Exactly. Thanks for listening to Wages and Prices with Fexingo. We'll be back tomorrow.