Americans are still finding plenty of work across the world’s largest economy and wage growth is robust, but labor market dynamics have mostly normalized.
That was the message from Thursday’s ADP report, which showed private firms added 164,000 jobs in December, considerably more than 23 people who wasted a lot of money and four years of their lives on an economics PhD collectively predicted. The range of (over)educated guesses was 60,000 to 175,000.
November’s headline was revised slightly lower. The three-month average is now back above 100,000 after dipping to 99,000 in November.
Hiring was broad-based. Manufacturing lost 13,000 jobs and information 2,000, but other than that, December’s report showed solid gains across sectors and firm sizes.
ADP’s new “Pay Insights” data showed job stayer pay growth rose 5.4% YoY last month. That was the slowest pace since August of 2021.
Pay growth for job switchers (“changers” as ADP calls them, or “shapeshifters” if you’re feeling comedic), was 8%, the slowest since May of 2021.
The spread between the two (conceptually, the reward for quitting, assuming you can immediately start a new job), matched a pandemic-era low.
That’s consistent with the decline in the quit rate from the JOLTS report released on Wednesday. Simply put: US workers are increasingly inclined to… well, stay put.
ADP chief economist Nela Richardson effectively called time on America’s abnormal labor market dynamics. “We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” she said Thursday. “While wages didn’t drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared.”
“While wages didn’t drive the recent bout of inflation…”
Yep. But that’s about all that the Fed seems to be fixated on. Let main street take the hit and help guarantee Trump II.
Well, aint this something!! A major global retailer is pushing back against the Greedflation poster child! Pepsi raised prices over 52% in only three quarters even as input price inflation was falling.
https://www.msn.com/en-us/money/companies/pepsi-lay-s-dropped-by-one-of-the-world-s-biggest-grocers-over-price-hikes/ar-AA1mtTwy?ocid=entnewsntp&pc=U531&cvid=10ad135ff48641d2b1d4fa2e4a994661&ei=36
The +HSD inflation of 2021/22 may have been primarily driven by goods and shelter but services inflation was still significant, and in 2023 services and shelter inflation took over as the primary inflation drivers while goods and energy were deflationary. Goods and energy won’t remain deflationary. Shelter inflation should slow this year, but I don’t see why it should stay low. Meanwhile, the service inflation that bedevils Main Street – the $16 hamburger, $6 coffee, and $45 men’s short haircut ($20, $8, and $55 respectively with tip and tax) – are in large part driven by wages.
On what do you base your assertion that wages have been the primary source of service sector price hikes? Is that data breakdown available somewhere?
I’m curious because the term “services” encompasses many business sectors, not just fast food. That includes you as well!
I don’t have a cogent analysis, hence was kind of wishy-washy there. I said the services inflation “bedeviling Main St” is “in large part” wage-driven.
These are the common services that average households encounter daily. I don’t hear my (non-market) friends complaining about rising prices for lawyer hours, collision repairs, or medical visits (they either don’t use those services often enough to know, or are insulated from prices by insurance/other). But they complain – or, today I guess we say, they vibe – about burgers, baristas, and barbers.
As for being in large part wage-driven, labor is the largest piece of the cost structure for those everyday services, and since the businesses are mostly small/local they are more struggling to stay afloat than raking in the corporate greedflation – I think.
I imagine there is good data/analysis of this somewhere.
Yes, it’s a bit opaque. But there is greedflation vulnerability even there. Small and local businesses do dominate in some subsectors, like saw sharpening and hair dressing, look at the food service side. Perhaps where you live you are lucky enough to have many thriving local vendors and venues to choose from, but in many of the fastest growing areas choices are more limited.
Purely anecdotal but maybe not: Since 1988 I had reasons to make the trip from Phoenix towards Flagstaff a few times a year. As time passed, the minutes required before you left the suburbs and then extended suburbs kept getting longer & longer. Mainly thanks to tract development from the big operators.
That’s relevant here because as you approach each exit, there are signs advising drivers what restaurants and stores are open there. It’s rare to find a local vendor listed until you get out past the planned suburbs. But within the perimeter, it’s all national chains when it comes to dining and shopping. One after another.
These are hardly mom & pop operations. Regional and then national operators continuing to shoulder out the locals. Those firms are more able to pass through greedflation price hikes all the while whining about how it’s so hard to find enough workers. (Well, willing to accept minimal wages for part-time split-shift work.)
And, for yet another unexpected consequence of higher interest rates, your local coffee shops cannot afford the rent hikes they are presented with. They just go out of business since they cannot cut wages to offset it. Your barber can’t afford the new rent so he/she gives up and signs on at FreshCuts.
No different than how the beer giants destroyed regional and local producers back in the last century. Homogenization is a profitable model. Helps by reducing SKUs and allowing more power when negotiating with suppliers.