It’s no secret that candidates have a lot of leverage in the current job market. Perhaps nowhere has that been more obvious than in the salaries candidates are able to command. In more than 25 years in the recruitment universe, I’ve never seen wage growth like this. For many years, our “bread and butter” placement activity took place at mid-level roles, with average annual salaries in the US $80K range. Salaries over US $100K annually were rare and only for senior roles. Now it seems rare to see a salary below that, and they’re for all sorts of roles in all sorts of industries.
This week, the US Federal Reserve released its newest Beige Book report, and there are some early indicators that wage growth is beginning to stabilize. The Beige Book describes economic conditions in the twelve Federal Reserve Districts. Demand for workers remains high, with economic activity expanding at a moderate rate over the past 60 days. Consumer spending has increased as the number of COVID cases has decreased. Manufacturing activity remains healthy, although continued disruptions in the supply chain, increasing prices, and a tight labor market mean that manufacturers in certain segments are having difficulty meeting demand. Price spikes due to the war in Ukraine are getting passed along directly to consumers. Vehicle sales are still messy in large parts of the country due to the ongoing chip shortage, which means low availability of new cars and huge price increases for used vehicles. Large portions of the US are also impacted by low inventory of both homes and rental properties. It seems like anyone you talk to can tell you how quickly homes are selling where they live, often well above the listing price, with buyers forgoing traditional steps like inspections and appraisals.
Workers who have more flexibility to move or take on contract roles have seen the biggest salary increases. Retention bonuses and non-wage incentives are becoming more common as employers are noting that salary increases are not enough to overcome the realities of the labor market. Regardless of the current economic drivers, the facts remain that the US labor pool is shrinking as the birth rate declines. Baby Boomers are retiring in large numbers, and the generations that follow them are too small to replace this huge section of the labor pool. While wage growth has been very high for new hires, salaries are not currently keeping up with the pace of inflation for employees who remain at their current jobs.
The current pace of wage growth is not likely sustainable for a long period of time. In fact, some employers are already seeing signs that growth is beginning to flatten. Others are using non-wage incentives to attract and retain the employees that are vital to their company’s success. Good candidates remain difficult to find, and skilled recruiters are valued for the service they can bring to their clients.