The US job market remains strong despite widespread layoffs
Government job cuts are the largest since September 2011, with the latest layoffs hitting the military and veterans affairs offices.
Whipbits
Despite high interest rates, stagnant inflation, dwindling savings and rising debt, economists are scratching their heads over how Americans can prop up the economy with their spending.
There may be a simple answer: jobs.
Wage growth has been surprisingly strong this year. According to a recent survey by leading job site ZipRecruiter, most people who land new jobs open their wallets, and many make major lifestyle changes, including buying a new home or car.
According to ZipRecruiter survey results provided exclusively to USA TODAY, fifty-seven percent of workers hired in the past six months increased their spending after taking on a new position. Thirty-four percent maintained their previous spending levels and 10 percent said they had reduced their spending.
The online survey, conducted in February and March, drew responses from 1,500 workers who had started their jobs in the previous six months.
Many of those who maximize their purchases go big. Forty-four percent of recent hires said they plan to improve their lifestyle by moving to a nicer neighborhood or bigger house, buying a new house or car, or moving their children to better schools.
Workers who stay in the same job and get raises also tend to spend more, and those who snag new positions typically see bigger pay bumps. Of the surveyed workers who changed jobs, 70% received higher wages and half of that group experienced double-digit wage gains.
What drives wage growth?
Earnings growth has picked up since the pandemic, due to severe labor shortages that have eased in recent months. For a couple of years, those wage increases have outpaced inflation, leaving families struggling. Since last May, however, average wage gains have topped price increases, allowing workers to stretch their paychecks further even as wage increases have gradually slowed.
„Over the past 10 months, real (inflation-adjusted) wage growth has been positive, so more workers and job-changers are seeing their purchasing power increase,” says Julia Pollock, chief economist at ZipRecruiter.
How is the job market in the US right now?
U.S. employers added 303,000 jobs in March and an average of 276,000 in the first three months of the year, up from an average of 251,000 in 2022. Job growth is expected to slow this year amid higher inflation and interest rates. But healthy wage increases have spurred spending, creating a virtuous cycle for the economy and the labor market.
As more people work, firm job growth can boost consumer purchases. That effect is magnified if workers move to higher-paid positions.
What happened to the big resignation?
Average annual wage growth for job switchers rose to 16.4% in June 2022 as a record number of Americans switched jobs amid a labor crisis amid the Great Resignation, according to payroll processor ADP. Since then, average wage increases have fallen steadily as labor shortages ease, to a more solid 7.2% in January.
But wage increases have picked up again in the past two months, with the annual increase reaching 10% in March, the highest since July 2023, ADP figures show.
The uptick suggests that „the labor market is still competitive among employers looking for talent and lucrative for employees looking for pay raises elsewhere,” says Liu Wang, lead data scientist at ADP Research.
Job-changers in construction, financial services and manufacturing earn the biggest wage gains, Wang says.
What are the challenges facing consumers?
The willingness of new hires more than offsets the barriers other families face.
The Federal Reserve's key interest rate is still at a 23-year high, pushing up mortgage rates and other borrowing costs. Inflation is at 3.5%, still above the central bank's 2% target. Americans' pandemic-related savings have largely dried up. And low- to middle-income families are burdened with record credit card debt.
Retire at 60? Millennials want to retire by 60. Good luck with that.
Bottom line: Even if the central bank pushes back interest rate cuts later this year due to high inflation, the twin forces of strong job growth and consumption will keep the economy humming. Consumer spending accounts for 70% of economic activity.
A key measure of retail sales rose in March and could translate into another strong annual consumer spending gain of 3% in the first quarter, according to Oxford Economics.
„If we continue to see this labor market strength, it could continue to drive (economic) growth,” Pollock says.
„Oddany rozwiązywacz problemów. Przyjazny hipsterom praktykant bekonu. Miłośnik kawy. Nieuleczalny introwertyk. Student.