As Labor Force Shrinks, Wages Increase

Takeaways:

• February added 379,000 jobs.
• On average, February saw more job postings per day than January.
• US employment dropped 7% while average weekly wages increased 7%.
• National advertised wages rose 16% in a single year.
• Wages will only continue to climb as employers struggle to attract workers during a time of low labor force participation.

February added 379,000 jobs

After a blizzard of job postings in September-January, employers added an impressive 379,000 jobs in February—the biggest increase since October. Most of the job gains were in leisure and hospitality (including restaurants) with smaller gains in healthcare and manufacturing, among other industries.

Despite this surge, still missing are nearly 10 million jobs from the 22 million that got wiped out last April.

On average, February saw more job postings per day than January

After hitting unseasonal high numbers in November through January, job postings seemingly cooled down a bit last month—but only because February is short. Overall, February saw 2.9 million total job postings, a 7% decline from January which had 3.1 million. However, February’s daily average was higher than January’s. February saw an average of 103K job postings every day, compared to 100K daily in January.

Job postings have surged ahead in major cities like Boston, New York, Dallas, and Atlanta.

A number of cities in Florida and California have seen the biggest drops in job postings since last February. Specifically, Orlando, Miami, San Jose, LA, and San Diego are posting less than they did this time last year. 

US employment dropped 7% at the same time that average weekly wages increased 7%

From September 2019 to September 2020, national employment tumbled nearly 7%, as the BLS just announced. During the same time frame, national average weekly wages shot up over 7%. 

This wage inflation was caused by two primary factors: Millions of jobs flooded the market, an event that would normally drive wages down, but in this case it coincided with the unfortunate phenomenon of dismally low labor market participation. 

Simply put, fewer Americans are working. Last February, the labor force participation rate was 63%. When COVID lockdowns hit, the participation rate dropped down to 60%, and now has rebounded to just 61%. That means there are approximately 6M fewer people in the labor market as there were in February of last year. 

People either can’t find work, or can’t leave their kids, or aren’t motivated to get a job because they’re getting unemployment benefits. In addition, nearly 30 million Baby Boomers retired by the third quarter last year, leaving a dizzying number of positions to fill.

Even though the number of jobs in the US economy decreased, the number of workers decreased even more. Hence, companies are struggling to fill open positions. So to attract the workers they need, they must offer higher pay. It is a simple matter of supply and demand. 

Finally, another reason for the increase in wages is that the jobs most affected by COVID were low-wage. As these jobs evaporated, the average wage for all jobs necessarily went up.

Advertised wages increased 16% in a single year

We just released a new feature that tracks advertised wages. On average, advertised wages grew by 16% in a single year, February 2020 to February 2021.

Here are three sample occupations whose wages increased.

1. Nurses – Advertised wages for nurses have increased by nearly 32% since 2018 and are up 9% just since last July. With many nurses quitting their jobs, hospitals are upping their wages in order to encourage replacements. 

2. Truck Drivers – The advertised salary for truckers increased over 18% since March 2018, but 15% of that growth came just since last January. Everybody’s shopping online and we need those truck drivers, but the problem is, it’s a tough job. But you know what helps? Higher pay. So that, among other perks, are what trucking companies are offering. 

3. Forklift Operators – Between July and August of 2020, advertised wage for forklift operators in Detroit jumped from $14/hour to $15/hour—a 7% increase in one month! What happened? Amazon announced an initiative to hire 2,000 works in Detroit at $15 an hour. When Amazon started posting, the median advertised wage jumped to $15/hour, and has stayed there ever since because every other employer had to match them simply based on market dynamics.

As employers struggle to attract workers during a time of low labor force participation, we can expect to see wages continue to balloon.

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