Historic Wage Surge for November Hires, Suggesting a Tight Labor Market According to NY Fed Report

By Moon Harper

Dec 19, 2023 12:14 AM EST

The average annual wage employers are willing to offer new workers reached a record-high increase of $79,160 in November from $69,475 in July, according to the Regional Fed Bank's Survey of Consumer Expectations Labor Market Survey.

Tight Labor Market

According to the Federal Reserve Bank's Survey of Consumer Expectations Labor Market, the average annual wage offer for full-time workers increased from $69,475 in July to $79,160 in November. The wage in November was the highest on record, suggesting that there is still a tight labor market and employers have to pay more to hire workers. Employees who participated in the survey also reduced their "reservation wage," or the lowest amount they would accept for a new position, decreasing from $78,645 in July to $73,391 as of last month.

The report also indicated that there might be a rise in job market turnover. Comparatively, 23.1% of respondents stated they had looked for a new job in the previous month, up from 19.4% in July. In the meantime, the probability of changing careers was predicted to increase from 10.6% in July to 12.3% in November. Additionally, a record 3.5% of respondents, the highest reading for the survey, showed the likelihood of leaving the workforce, according to the report.

Federal Reserve's Rate Cuts

The Federal Reserve has indicated it won't continue raising short-term borrowing costs to address inflation. Central bank officials are considering whether decreasing inflationary pressures will permit them to lower the policy rate next year.

Growing confidence in the decline of inflation is tied to the perception of a more balanced labor market. This balance may reduce the upward pressure on wages, ultimately bringing overall inflation back to the Federal Reserve's target of 2%. It's important to note that this process is still unfolding.

Mary Daly, President of San Francisco's Federal Reserve Bank, also expressed that the American central bank is considering cutting its interest rate next year due to this year's improvement in inflation. The Fed wants to hit its 2% inflation target while causing the most minor disruptions to the labor market, underscoring the significance of a balanced approach. In an interview with the Journal, she emphasized the need to preserve price stability without adversely affecting employment.

Avoiding Overtightening

Daly also highlighted the risk of maintaining steady rates with inflation trending downward. This could result in higher actual borrowing costs for households and businesses. She noted the importance of avoiding overtightening, given the current economic conditions.

Even with a projected 75 basis-point reduction in the benchmark rate next year, Daly emphasized that monetary policy would still be considered "quite restrictive," as conveyed to the Journal.

Jerome Powell, Chair of the Federal Reserve, noted that there is still a more considerable demand for labor than available workers, notwithstanding the ongoing rebalancing between employers and job seekers. During a press conference following the central bank's previous policy meeting, Powell made these remarks.