The Real Deal With Real Wages

Welcome back to the Recruitonomics Newsletter! This week, we’re breaking down the real deal with real wages, plus the latest U.S. jobs report. 

Powered by Appcast, Recruitonomics.com is a hub for data-driven research that aims to make sense of our evolving world of work. Combining labor economics and recruitment best practices, Recruitonomics is constantly releasing new data and insights to bring clarity to the chaos of a changing economic landscape.

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This Week on Recruitonomics:

The Real Deal With Real Wages and Productivity 

If one thing has defined this economic period, it would be a wide disconnect between reality and perception. The vibecession is still upon us, with consumers feeling worse about the economy than the well-performing labor market probably deserves. The stagnation of real wages is an enduring wrong perception that is oft-quoted – and perhaps partly the fault of one of the United States’ largest data sources. The data from the Bureau of Labor Statistics (BLS) seemingly displays a massive disconnect between worker productivity and real pay (compensation adjusted for inflation) in the U.S. The implication, of course, would be that regular Americans have not benefited at all from the economic growth that has been generated in recent decades. But, this chart isn’t totally accurate: The Bureau of Labor Statistics overstates inflation when calculating real wages. The BLS uses the consumer price index to adjust its wage statistics to inflation, rather than the Federal Reserve’s preferred Personal Consumption Expenditure index. Economists estimate that CPI is upward biased by at least 0.3 to 0.4 percentage points each year, inaccurately portraying consumer behavior when faced with higher prices, like substitutions. If we look at the more accurate measure of inflation, we see that real wages have actually gone up about 42% since 1980, compared to the meager 18% suggested by the BLS! 

Read the full article here.

What does this mean for recruiters? 

When the media, workers, and even some economists are pointing out that real wages have performed abysmally in recent decades and that companies are not compensating their workers enough, the truth is that this reasoning is based on flawed data points. 

The Labor Market is Slowing, and That’s (Mostly) Okay

While much of the United States was gripped with high temperatures in June, the labor market came in much cooler. The U.S. economy added 206,000 net new jobs last month, while the unemployment rate increased to 4.1% – finally breaking the nearly-three-year run of 4%-or-below unemployment rates. Slower job growth and an increasing unemployment rate may seem nerve-wracking, but this is (mostly) okay. Why? Because it’s the goal of the Federal Reserve to bring supply (the labor force) and demand (hiring) into better balance while reducing inflation. We may be witnessing the soft landing happening in real time: Nearly every industry has recovered its lost jobs since 2020 and inflation is nearly within reach of the 2% target range. Labor force recovery has been strong, while demand has flattened off. As for the rising unemployment rate, it may point to a more active labor force rather than an increase in layoffs.

Read the full article here.

What does this mean for recruiters? 

Under a soft landing, recruiters are hiring in an easier labor market. For some, this may be a breath of fresh air after years of hectic recruiting patterns. For others, this may be causing stress, especially if you’re in a sector that has stalled completely, like certain “sitting down” industries such as tech. The good news, though, is that as inflation returns to the 2% target, the Federal Reserve will begin loosening interest rates, hiring will likely rebound.  

Recruiting Tips: 

The year is just over halfway done, and it’s been quite a year so far. As we gear up for the remainder of 2024, we look to the trends that are shaping this year’s recruitment environment. Between macroeconomic shifts, labor market movements, and of course, technological advancements, there’s plenty to look forward to in just the next two quarters. This quick “pulse check” on the trends that will shape the remainder of 2024, based on our recent webinar, can help recruiters and talent acquisition professionals plan accordingly. Read Appcast’s 2024 Mid-Year Recruiting Trends here! 

Recently on Recruitonomics:

Climate change is no longer a distant threat but a present reality that is directly impacting people’s lives and the global economy. Changing temperatures, shifting precipitation patterns and increasing sea levels are not only altering natural landscapes but also reshaping economic activity. Emerging markets are especially vulnerable to these changes, as they are often positioned in more volatile areas, have fewer resources and are dependent on climate-sensitive industries. While advanced economies are slightly better equipped to implement mitigation strategies, they are not immune to economic disruption. In the United Kingdom, Germany, and Southern Europe, climate change has already begun to negatively impact the local economy and labor market. In the U.K., adverse weather conditions like increased precipitation and increased heat have depressed consumer sales in retail and food services, directly impacting demand for labor in the sector. In Germany, climate change has drastically impacted water levels in main rivers that are integral to shipping. The Rhine, one of Europe’s most important waterways, has seen shipping stalled for weeks at a time by plunging water levels. Not only does this decrease industrial production, it could also feed into a global increase in prices if this volatility continues. In Southern Europe, extreme weather events like heat waves and wildfires could impact tourist flows, which directly hurts the GDP of these countries. 

Read the full article here.

What Recruitonomics is Reading:

We’ve talked a lot about the destiny of demographics: That advanced economies will be facing labor shortages far into the future as workers continue to age and population demographics struggle to keep up. A new study from McKinsey outlines just how bleak this future may be, and highlights some suggestions on how to ease the demographic pain. By looking at this trend over 30 countries, this report shows just how transformational this trend will be for labor markets and ultimately economic growth across the globe. Read the full report here. 

 More Data & Insights:

➡ Can Weight Loss Drugs Boost Economic Growth?

➡ The Diverging Job Numbers – And Which One is Correct

➡ May Flowers Bring Job Power: US Economy Beats Projections

Thank you for reading! Stay tuned for next week's Recruitonomics Newsletter and check out Recruitonomics.com for more data-driven insights.