Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Job Openings Are Surging While Wage Growth Slows
Transcript
- Lucas: So job openings surged to 7.6 million in April. That's the highest in nearly two years. And yet, average hourly earnings only went up by five cents from March. That's basically flat. Luna: Seven-point-six million openings — that's a lot of 'help wanted' signs. But if companies are desperate for workers, why aren't they bidding up wages? Lucas: That's the puzzle. In a normal labor market, more openings mean more competition for workers, which pushes pay up. But we're not seeing that this time around. Average hourly earnings are at $37.40, up just a tenth of a percent month over month. Luna: And the ADP report today showed private payrolls grew by 122,000 in May — stronger than expected. So hiring is still happening. Just not at higher wages. Lucas: Right. The mix of who's hiring matters. A lot of the job openings are in lower-wage sectors like leisure and hospitality or retail. Those jobs pay less, so even if they add a lot of positions, they don't pull the average up much. Luna: But we also saw job openings in construction and manufacturing up. Those are higher-wage. So why no bump? Lucas: Part of it is that workers aren't switching jobs as aggressively as they were a year ago. The 'great resignation' vibe has faded. People are staying put, so employers don't have to offer big raises to retain talent. And the ones who are job-hunting don't have the leverage they used to because inflation is still eating into real income. Luna: Inflation is the key. The CPI hit 332.4 in April, up from 330.29 in March. That's about 0.6 percent month over month. So even if you get a small raise, prices are rising faster. Lucas: Exactly. The real average hourly earnings — adjusted for inflation — actually fell in April. So your nominal wage went up a few cents, but your purchasing power went down. That's the frustrating math. Luna: And then you add the Iran conflict. Energy costs are climbing. The euro zone inflation hit 3.2 percent partly because of that. So at the pump, at the grocery store, those costs are hitting everyone. Lucas: Yeah, the ten-year breakeven inflation rate is at 2.39 percent, which is down a hair from 2.40, but that's still above the Fed's target. So the market expects inflation to stay sticky. And that means the Fed is likely to hold rates higher for longer, which cools the economy and keeps wage growth in check. Luna: So we have a situation where employers are hiring, but they're not raising wages because they don't have to — and because inflation and interest rates are limiting their ability to pass on costs. Lucas: Right. And there's another factor: productivity. If companies can get more output per worker without paying more, they won't raise wages. And recent productivity numbers have been decent. So employers are happy to fill roles at current pay. Luna: But for the worker, that feels like running in place. You get a job, but your paycheck doesn't stretch further. Lucas: And that's the disconnect. The headline '7.6 million job openings' sounds great. But the reality for most people is that their raise is getting eaten by costs they can't control. We talked about energy inflation a few episodes back — it's still the main culprit. Luna: I wonder if this is a temporary blip or a structural shift. Are we entering a period where wage growth stays low even with a tight labor market? Lucas: That's the million-dollar question. Some economists argue that the pandemic-era wage gains were a one-off, and that we're returning to a lower wage growth equilibrium. Others say once the Iran situation stabilizes and energy costs come down, wage growth will pick back up. Luna: But in the meantime, listeners are feeling it. If you're one of them, and you find these episodes useful, a couple of dollars a month genuinely helps keep the show going. You can support us at buy me a coffee dot com slash fexingo. It makes a real difference. Lucas: Yeah, that kind of support is what lets us stay independent and ad-free. And we really appreciate it. Back to the data — one thing I find interesting is that the JOLTS report also showed quits are down. People are less confident about leaving their jobs. Luna: Which makes sense. If you're not sure about wage growth elsewhere, you stay put. That reduces churn and keeps wage pressure off employers. Lucas: Exactly. So you have this feedback loop: low quits → less competition for workers → slower wage growth → workers feel stuck → even lower quits. Luna: And the people who do move jobs — are they getting big raises? Lucas: Some are, but the premium for switching has narrowed. Atlanta Fed data shows wage growth for job switchers has slowed from 7 percent to around 5 percent. Still better than staying, but not the huge leap it was. Luna: So the advice for someone listening might be: if you can switch, you might get a bump. But don't expect the moon. Lucas: Exactly. And if you stay, negotiate for non-salary benefits — flexible hours, training, things that improve your real income without showing up in the hourly wage number. Luna: That's a good point. The Bureau of Labor Statistics' employment cost index for wages is at 177.5, up from 176.23 in the previous quarter. So total compensation is rising, but slowly. Lucas: Right. And that index includes things like bonuses and benefits, which have been growing faster than wages alone. So some of your raise might be coming in forms you don't see on your pay stub. Luna: But if the cost of living keeps going up, a bonus doesn't help with rent. And rent is still rising. Lucas: Yeah, we did a whole episode on rent eating raises. That hasn't gone away. The shelter index in CPI is still climbing. So even if energy costs moderate, housing costs are sticky. Luna: So to sum up: job openings are high, hiring is steady, but wage growth is sluggish because of inflation, energy costs, low quits, and productivity gains. Workers are getting jobs, but not getting ahead. Lucas: That's the picture. The question is whether this is temporary or the new normal. And the answer probably depends on geopolitics and the Fed's next moves. Luna: Well, we'll keep watching the data. Thanks for joining us on Wages and Prices. Lucas: Until next time.