In a clear sign that inflation has a stronghold in the labor market, American workers are now demanding an average of nearly $80,000 annually to consider changing jobs, reaching a record high this year.
According to the latest employment survey from the New York Federal Reserve released on Monday, the average "reservation wage," which represents the minimum acceptable salary for switching jobs, surged to $78,645 during the second quarter of 2023.
This figure marks an 8% increase from just a year ago and stands as the highest level ever recorded in a data series dating back to the beginning of 2014. Over the past three years, including the Covid-19 pandemic era, this level has climbed by more than 22%.
This number is significant because wages have increasingly been recognized as a driving force behind inflation.
While the prices of goods have somewhat eased after pushing overall inflation to its highest level in over 40 years in mid-2022, other factors continue to keep inflation well above the Federal Reserve's targeted rate of 2%.
The New York Fed's data aligns with an Atlanta Fed tracker, which indicates that overall wages are rising at a 6% annual rate, with job switchers seeing gains of 7%.
Employers have been striving to keep pace with these wage demands, pushing the average full-time job offer to $69,475, reflecting a 14% increase in the past year.
The anticipated annual salary has also risen to $67,416, marking a gain of over $7,000 from a year ago and establishing a new high.
Despite the wage gap between worker demands and job offers, overall satisfaction with compensation and opportunities for advancement has increased across the board.
As financial markets remain apprehensive about the Federal Reserve's next policy move, the emergence of further signs indicating a tight labor market increases the likelihood that policymakers will maintain higher interest rates for an extended period.
During their July meeting, officials noted that wages "were still rising at rates above levels assessed to be consistent with the sustained achievement" of the 2% inflation target, as indicated in the meeting's minutes.
Additionally, Monday's survey results revealed some mixed patterns in the labor market.
The percentage of job seekers—those actively looking for work in the previous four weeks—fell from 24.7% a year ago to 19.4%. This decrease coincided with a drop of 738,000 job openings to 9.58 million, according to the U.S. Bureau of Labor Statistics.
Furthermore, the likelihood of job switching also declined, from 11% a year ago to 10.6%, while expectations of receiving new job offers decreased from 21.1% to 18.7%.
