Wage pressures are easing and job market is cooling
Wage pressures continue to cool however you want to slice it. The 3-month moving average for jobs posted on Indeed.com is now back to the pre-Covid trend, mirroring the move in the Quit Rate and Job Switcher as published by the Atlanta Fed. The latter two indicators are telling: workers quit their jobs when they feel secure in their prospects for either finding a new job or in their financial outlook. And while workers tend to switch jobs for several reasons, a main catalyst for such a move is higher compensation.
These two metrics returning to their pre-Covid levels provide further evidence that the labor market is easing and that wage pressures are falling. Helping to bolster the wage pressure story is immigration. Since the beginning of the pandemic, the number of foreign-born workers has jumped by almost 3.5 million, helping to fill supply shortages witnessed in many of the service segments of the economy. This increase in supply has also helped put downward pressure on wage growth, further easing the pressure on demand-driven inflation.
We should also note that consumers are spending more in places that are showing weaker price growth and less in areas of firming price growth – signs of a more discerning consumer who is now willing to pull back in the face of higher prices. More importantly, to get the sort of inflation that many are fretting over, you need to see general prices increase across the board. And we just don’t see that. The inflation reaccelerating story is an easy one to tell, but a hard one to support with the actual data.