Having a job right now means longer hours and slow pay growth

restaurant worker New York City NYC
A restaurant worker wears a protective face mask and gloves in midtown as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on August 13, 2020 in New York City.

  • While new hires are benefitting from rising pay and new incentives, employed Americans face worsening conditions.
  • The average workweek rose through the spring, and wage growth for the employed weakened.
  • The trends come as quits sit at record highs, suggesting Americans are leaving jobs to benefit from the labor shortage.
  • See more stories on Insider’s business page.

Americans waiting to rejoin the workforce have a lot going for them. Businesses rushing to rehire are raising wages and throwing in other incentives ranging from signing bonuses to free iPhones.

It’s another story for employed Americans. By some measures, their work lives are actually worsening.

The sudden reopening of the US economy placed the labor market in a unique spot. After years of strained job supply and an abundance of workers, the formula flipped. Employers were suddenly struggling to hire, and workers were in short supply.

The so-called labor shortage has led businesses to step up their efforts to attract workers. Average hourly earnings ballooned for two months straight as employers boosted pay, particularly for new hires. But for those already employed, data shows a decline in conditions.

For one, average weekly hours have crept higher through the spring. Work hours dipped slightly to 34.3 in May, landing just below 20-year highs. The latest reading compares to a pandemic-era low of 33.4 hours. Some of the uptick is likely due to part-time workers converting to full-time, but the trend could also suggest employed Americans are working more as the country rebounds.

Wage Growth Tracker
Source: The Federal Reserve Bank of Atlanta.

Those additional hours are also yielding less in return. Wage growth for already-employed Americans has been on the decline through the year, most recently falling to an unweighted three-month moving average of 3% from 3.2% in May. By comparison, the average rose as high as 3.9% in late 2019.

The growing workweeks and slowing pay growth come amid a major shakeup in the US labor force. Quits rose to a record high in April, according to JOLTS data published last week. At the same time, payroll growth slowed sharply and job openings leaped to a record high. Taken together, the data signals a broad rethink of how Americans work and what they demand as compensation.

A Monday report from the Federal Reserve Bank of New York shed new light on the unusual labor-market situation. The mean perceived probability of losing one’s job fell to 12.6% in May, the lowest level since the Fed’s survey began in 2013.

Yet the mean perceived probability of finding a job after losing work rose to 54% from 49.8%, according to the report, the largest one-month gain on record and the gauge’s highest level since February 2020. The gain suggests Americans are the most confident in their chances of finding work since the pandemic recession began.

With quits at record highs and incentives for new hires growing more attractive, workers could be switching jobs to take advantage of the labor shortage and extraordinary demand from employers.

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One shocking chart shows used-car prices jumping another record amount in May, highlighting the strange gaps in the economy’s recovery

Used car sale dealership
Sale signs lie on vehicles at a General Motors Chevrolet dealership July 6, 2005 in Ferndale, Michigan.

  • Used-car prices likely jumped yet again in May, UBS says, following a 68-year record in April.
  • Used cars have been one of the primary drivers of increased consumer inflation.
  • It’s one strange part of the puzzle that is America’s economic recovery from the pandemic.
  • See more stories on Insider’s business page.

If you’re in the market for a used car, be prepared for some sticker shock. Prices are projected to have skyrocketed again in May, and that boom is probably going to be a primary driver of increased inflation.

A note by a group of UBS researchers, led by Alan Detmeister, forecast a 10.8% price increase. That’s even higher than April’s record-breaking surge of 10%.

used car prices jump
Chart via UBS.

Those pre-owned cars are adding significant mileage to inflation in the US. UBS projects that core Consumer Price Index (CPI) will have another “massive” rise in May; simply put, that means things got even more expensive. That follows a 13-year high in April. In both April and May, the increase is “heavily driven” by used car prices, according to UBS.

Used cars are just one of a myriad of shortages throughout the US economy, part of the country’s strange rollercoaster of a recovery. A global computer-chip shortage has wreaked havoc on the automotive industry, potentially costing it up to $110 billion just this year, Insider’s Dominick Reuter reported. Those chips are used for everything from car engines to Bluetooth capabilities. That’s slowed production of new cars – right when Americans are itching to buy them, as Insider’s Katie Canales reported.

“With pressures on the used car market, along with returning demand for travel, we expect further increases in these categories in the coming months,” the UBS researchers write. They also expect “solid” price increases for new cars and apparel.

Another shortage could be holding up economic recovery

Last week brought the May jobs report, which tracked payroll gains for the month. It showed signs of labor-market acceleration, as Insider’s Ben Winck reported, with the unemployment rate dropping. However, the number of payrolls added came in below expectations.

A separate UBS note from researchers led by Andrew Dubinsky said jobs are rebounding slower than expected because of shortages – “temporary labor supply bottlenecks implied by strong wage gains are slowing growth.” For instance, the youngest workers, who are 16 to 24, saw declines, which UBS attributes to them potentially returning for in-person schooling.

So something else is getting more expensive: The amount that workers get paid. Employers are forking over more money to try and get workers to join their workforce.

As the UBS researchers write, “Annualized leisure wage growth of around 20% in the past three months suggest the recovery is being held back by labor supply.” That wage growth signals that labor-market-supply issues will be temporary, UBS said.

But it’s not just a matter of wages keeping people out of the workforce. Some unemployed workers are rethinking work and what they want out of it, while others struggle with a labor mismatch – the jobs that are open don’t necessarily fit with their skills, or previous experience. Despite all of that, it doesn’t appear that increased unemployment benefits kept workers from returning in May. In 25 GOP-led states, governors have prematurely announced an end to federal benefits to get workers back, but, as Insider’s Ayelet Sheffey reported, they returned regardless.

And, of course, there’s still an ongoing pandemic. UBS, which is “optimistic” about labor force participation in the coming months, notes COVID fears may subside. That’s one factor that may have been keeping older workers from returning.

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The American worker had been earning less throughout the pandemic. That ended in March.

restaurant worker New York City NYC
A restaurant worker wears a protective face mask and gloves in midtown as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on August 13, 2020 in New York City.

  • US wages went into pandemic-related decline in March 2020, and exceeded that level in March 2021, per BLS data
  • The indicator is the latest to surpass past highs as stimulus and reopening power the US rebound.
  • The boost was driven by stronger wage growth for low-wage workers, a group hit hard by lockdowns.
  • See more stories on Insider’s business page.

Various economic indicators are surpassing their pre-pandemic highs as stimulus and reopening drive the country toward a full recovery.

US wages are the latest to rebound.

Salaries and hourly wages finally leaped above their February 2020 peak in March 2021, according to the Bureau of Economic Analysis. Employee payment across the country rose to a seasonally adjusted annual rate of $9.78 trillion from $9.67 trillion, marking a new record high and an eleventh consecutive climb.

By comparison, it took more than twice as long for wages to fully rebound from their decline during the Great Recession.

The sharp increase seen two months ago was powered by stronger wage growth for workers in food preparation and serving, cleaning, and individual care, a group hit hard by lockdowns. Those Americans have enjoyed a massive jump in wages from January to March as vaccines started to be rolled out and service jobs bounced back. Wage growth for managers, professionals, technicians, and office and administration workers remain below their pre-pandemic rates, albeit only slightly so.

The bounceback in low-wage income growth marks a positive development amid the largely uneven recovery. The white unemployment rate still sits significantly lower than that for Black and Asian Americans. And while wages are rebounding across racial and gender lines, the pandemic only exacerbated long-lasting inequalities.

More broadly, the labor market seemed to turn a corner in March. Payroll growth shot higher as stimulus and the easing of lockdown measures juiced the economic recovery. Gains were also strongest among leisure and hospitality businesses, some of the firms hit hardest by the virus and its fallout.

The labor market’s rebound is expected to have accelerated last month. The Bureau of Labor Statistics is set to publish April payroll growth data on Friday and reveal how reopening and warmer weather benefitted hiring. The median estimate from economists surveyed by Bloomberg calls for nearly 1 million nonfarm payroll additions. They also expect the unemployment rate to drop to 5.8% from 6%.

Economists got their first preview of April job creation Wednesday morning. The country’s private sector added 742,000 payrolls in April, according to ADP’s monthly employment report. That missed the median estimate of 873,000 private payrolls but still marked a fourth straight monthly gain.

“Service providers have the most to gain as the economy reopens, recovers, and resumes normal activities and are leading job growth in April,” Nela Richardson, chief economist at ADP, said.

[Editor’s note: This article has been updated to remove the Federal Reserve phrase classifying workers in food preparation and serving, cleaning, and individual care as “low-skill workers,” a term increasingly seen as problematic.]

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