The latest ADP Private Payroll Report showed that wage growth for career changers is normalizing. As wage benefits for changing jobs decline to typical pre-pandemic levels, workers have less incentive to voluntarily leave their current jobs.
Yahoo Finance's Josh Schafer explains the details.
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Editor's note: This article was written by angel smith
video transcript
Julie Hyman: And looking ahead to the rest of this week, another huge economic indicator will be released: the January jobs report. This comes after ADP's private sector payroll data showed job hopping isn't as profitable as it used to be. And salary allowances due to major resignations are becoming a thing of the past. Our guy Josh Schafer looks at that data in the ADP report. Interesting –
Josh Shafer: Normalization, Julie, I think that's our word here. And when we talk about whether the labor market is softening, cooling, or going into recession because these interest rates have been around for so long, we often wonder if the labor market as a whole is I think the words will continue to be used. I think it's important to point out now that economists, and in some ways Federal Reserve Chairman Jerome Powell, are talking about the labor market today, but it's actually going back to where it was before the pandemic. It says more about being.
I think this can be seen from the ADP chart released today. And if you look at the wage growth for job changers and job leavers, you'll see people quitting their jobs for new jobs at the purple line. And your blue line only shows wage increases for those who keep their jobs.
You can see this big spread in 2022 when people were getting a bunch of crazy incentives to quit their jobs. And it felt like people who left a job were quickly getting another job. And there were countless stories about such things. Now going back to the percentage point spread we see between these two lines is 1.9%. And this is pre-pandemic levels.
Okay, back to the topic, of course, I think a lot of people know that when you leave your job, you're probably going to get a little bit more of a raise than you would get at your current job, but there's nothing unusual about that. . And I think this is probably kind of a welcome sign for the Fed in terms of its impact on wage growth and potential inflation.
Josh Lipton: You're only talking about the Fed, and you're telling bits and pieces about how wage growth has declined. So this is welcome news for Jay Powell and his friends.
Josh Shafer: It is certainly so. Another piece of wage growth data announced today was the employment cost index. And the quarter-over-quarter increase was less than 1%. This is the first time in about two and a half years that the ECI rose less than 1% on a quarterly basis. This is an ideal scenario for the Fed. Because if we keep making this much money, and perhaps too much money, we might be willing to pay a higher price. So at this point it seems like it's going in the Fed's favor and moving in the right direction.
Julie Hyman: I wish there was a way for us all to make more money without paying high fees.
Julie Hyman: That's the ideal, right? That's a real soft landing, Julie. That's the ideal scenario for us.
Julie Hyman: Okay. Josh Schieffer, thank you so much.
