U.S. job growth remains strong while real wage growth remains tepid despite a 3.9 percent unemployment rate nationally, but things may be changing. It is unlikely that companies can hold the line on wages – and depress real wage growth – when low unemployment encourages workers to quit their jobs in search of a higher salary. The rate at which workers are voluntarily leaving their jobs (the “quit rate”) is as high as it has been in 17 years (see graphic) as measured by the U.S. Bureau of Labor Statistics “Job Openings and Labor Turnover Survey” (JOLTS).
This indicates a strong labor market where workers are confident that if they leave their job they can easily find another. The prospect for higher wages is a big reason. The Federal Reserve Bank of Atlanta’s wage measure for job switchers — people who leave one employer for another — reached 4.4% in March and is at 3.9% in June, well above wage growth for workers overall. It is a good environment for workers facing stagnating real wage growth to start looking for better pay, forcing firms to boost compensation to attract and retain employees. Although this is good for consumer spending, corporate profit margins may get pinched unless employers can cut costs elsewhere.
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