The labor market is one of the key factors in judging how the economy is doing, and right now that’s making for some confusion across the US. At the moment, the labor market is both hot and cooling. The big question for the Federal Reserve’s policymakers is how fast it’s cooling.
Perhaps the biggest question marks around that question come from the number of people choosing to leave their jobs. Generally speaking, a person won’t quit their current job unless they have another to go to and that other job pays better in some way.
Defining Better Pay
Since the pandemic, the definition of better pay comes in multiple forms.
There are many stories of people leaving a job to open their own business in the same industry – better pay coming down to having more control over their work circumstances. One chef in the Portland area made the news when he opened a restaurant post-pandemic, saying that he was going to work 12 hour days either way and that he preferred doing so for himself.
For some, it’s the ability to continue to work from home. As things open up again, many corporations are requiring employees to come back to offices, and there’s nothing quite like a 30 second commute. Companies that can offer flexibility are scoring big with work from home positions.
Sometimes better pay comes in the form of better benefits. Insurance costs more, vacation time has begun to be put to better use, and paid time off to care for family and self are considered a premium. If a business can make their employees feel like they are valued in these ways, they’ll catch a prospective worker’s eye.
And, of course, sometimes better pay is simply a larger paycheck at the end of the month.
According to the New York Times’ Ben Casselman, the graphs for the number of job openings and the number of resignations are nearly parallel lines that dipped drastically in 2020 and have risen just as drastically since. While those lines have a couple million people’s worth of space between them – the number of resignations consistently lower than the number of openings, it doesn’t change the fact that they are both at record highs.
Locally, take into consideration the number of high level executives who are moving on – most recently Economic Development’s Kate Porsche, but in August both Executive Director and Managing Director for Benton Habitat for Humanity, Karen Rockwell and Darren Sidder, respectively.
These numbers are beginning to cool off, but not to such a degree that there isn’t still a reason for concern, and many economists believe that the resignations line is a better barometer of market strength.
And the market is running very hot. People are buying things as fast as the things are made available, plane tickets are overselling for flights, and hotel rooms are hard to come by. All of that leads to increased fees and that naughty word we hate to read – inflation.
The Fed’s Take
In response to the situation, the Fed has raised the prime interest rate by 0.75% for the fourth time since June. That means that in the last five months, the federal interest rate has risen by 3% or, in the parlance they prefer, by 300 basis points done in four 75 basis point installments.
Most experts weren’t surprised by the most recent rate hike, but they are calling for the Fed to hold off and any new increases for the immediate future. Many hope to see this latest hike do the trick and get the economy to chill a little. Then there are others who want to see the rate hikes continue until we know for sure that these increases do the trick without dumping the US in a recession.
This is where the job market comes into play. If companies keep adding more jobs and paying higher salaries, then demand for goods and services will remain high. If demand remains high, then the companies on the supply side of that equation will have to keep hiring and increasing pay to get the workers they need.
Aside from simply supply-side considerations like buying items, consider how long the list of job openings within our local government has become. Currently, Benton County is looking for 31 people to hire – from Accountants to Environmental Health Program Managers. The City of Corvallis is looking for 24 new hires – Computer Support Specialists to Engineering Technicians. Meaning that our government is in competition with the business community for at least 55 of the potential applicants out there.
The Fed chair, Jerome Powell, has said that this is not the time to talk about pausing rate increases.
Currently, job openings outnumber unemployed workers two-to-one, which means that demand is continuing along at too great of a clip for supply to keep up. Add to this the holiday season and the tradition of seasonal hires, the need for more bodies to meet demand just continues to grow.