Saturday, August 26, 2023

"Powell’s Inflation Nightmare: Job Seekers, incl. the Employed, Suddenly Expect Massively Higher Wages in Job Offers"

I'm all for workers staying ahead of inflation (plus more) and I'm all for private sector unions—although like President Roosevelt* I think public sector unions should be outlawed—when you have a situation like the United Auto Workers demanding a reduction in the workweek from 40 to 32 hours and (Detroit News, August 3):

UAW demands 46% pay hike in talks with Detroit Three automakers

You are going to have some inflationary pressure.

From Wolf Street, August 21:

And the offered wages that job seekers actually received also spiked massively as employers comply with a new reality.

Wages of job offers received by job seekers, and expectations for wages by job seekers surged in July, in another sign that this inflation is making its imprint on the labor market, and it’s not backing off at all, on the contrary, and then the fretting starts that much higher wages will lead to still much higher inflation.

The wages that job seekers – not just the unemployed, but also the employed looking for another job – expect to get in their job offers spiked by $7,105, or by 11.8%, from a year ago to $67,400 on average, according to the New York Fed’s Survey of Consumer Expectations (SCE) this morning. This portion of the SCE is conducted three times a year, in July, November, and March.

It was the biggest spike in job-offer wage expectations in the data of the SCE, which goes back to 2014.  Clearly, job seekers feel encouraged – and it’s pedal to the metal for their wage expectations:

Employers, still struggling to find qualified employees, seem to play along in order to hire people. The average full-time wage of job offers that job seekers actually received spiked by $8,711 year over year, or by 14%, to a record $69,500 in July, according to the SCE.

The lowest wages that job seekers would be willing to accept to take a new job – the average reservation wage – jumped by 7.9% year-over-year, to $78,600....

American Presidency Project:
112 - Letter on the Resolution of Federation of Federal Employees Against Strikes in Federal Service August 16, 1937

F.D.R. Warned Us About Public Sector Unions -
February 18, 2011 

Friday from Wolf Street:
"Powell Smacks Down Calls to Raise 2% Inflation Target: '2% Is and Will Remain our Inflation Target'”