The U.S. labor market is showing signs of strength with the latest job report showing the economy added 379,000 positions in February. According to the latest data, job switchers are reaping the biggest rewards from the tight labor market. Nearly half of U.S. workers who changed jobs in 2021 received a pay raise that exceeded the average pace of inflation, according to a new blog post published by the Federal Reserve Bank of Atlanta. The report found that 49% of job-switchers saw their real hourly wage increase faster than inflation last year, compared with just 42% of workers who stayed in the same job.
The extremely tight labor market has allowed workers to quit their jobs in favor of better wages, working conditions, and hours, a trend dubbed the "Great Resignation." At the same time, stubbornly high inflation has left many workers in a cost-of-living crunch. The Atlanta Fed analysis, conducted by senior policy adviser John Robertson, shows that younger workers, as well as job switchers, had the highest chances of keeping up with inflation. Just 38% of employees age 55 and older saw an increase in their real wages last year, a marked drop from the 53% that recorded an increase in 2019. By comparison, 60% of workers between the age of 16 to 24 received a raise last year above the cost of inflation.
Although job switchers are receiving the biggest pay raises, the variation in nominal wage growth across individuals and industries remains a challenge for economists. With the labor market showing signs of strength, only time will tell if the trend of job switchers reaping the biggest rewards continues.