As the economy continues to recover from the epidemic, Americans change jobs frequently, and with the labor market still relatively tight, US companies experienced unprecedented wage increases in the first quarter in an effort to retain employees.

Some analysts worry that this will exacerbate inflationary pressures and that the wage-inflation spiral of the 1970s may make a comeback.

American employees frequently change jobs A big rise in wages

Many American employees are making or considering job-hopping to achieve a big pay rise, the Wall Street Journal reported on Sunday.

Recruitment website ZipRecruiter conducted a survey of 2064 American employees who successfully changed jobs. The results show thatIn the past six months, about 64% of job-hopping workers have been paid more. Of these people, nearly half have a pay rise of 11% or more. Nearly 9% of people earn at least 50% more than before.

To make matters worse, the job-hopping rate may continue to rise.About 20 per cent of prime-age employees between the ages of 25 and 54 expect to leave within a year, while another 26 per cent expect to stay for one or two years, according to the survey. Julia Pollak, chief economist at ZipRecruiter, points out that historically, the average length of a job is four years.

A large-scale salary increase in American companies has never been seen before.

In order to retain employees, most American companies choose to give their employees a raise.

From April 4 to 12, the National Association for Business Economics (NABE) conducted a survey of 84 members and found thatIn the first quarter, the proportion of wage increases in the United States soared to 70%, the highest level since the first survey was recorded in 1984, and about 71% of respondents expected labor costs to continue to rise over the next three months.

The good news is that labour market shortages are improving. Nearly 1/3 of the companies surveyed said there was no labor shortage. About half of companies still report skilled labour shortages, but it is worth mentioning that the proportion of companies reporting skilled and unskilled labour shortages has fallen from the January survey.

Higher wages could further exacerbate inflation. Fed is under great pressure.

As prices rise, wages rise widely, which is a good thing for employees, but not so good for the Fed.

Some analysts believe that wage increases may further aggravate inflationary pressures.

"higher wages are good, but if it pushes up inflation further, it's not good," said Diane Swonk, chief economist at Grant Thornton, according to the Wall Street Journal.

Nearly 27% of economists surveyed by the Wall Street Journal in April saidRising wages are the biggest inflation risk this year.This is higher than those who believe that the conflict between Russia and Ukraine and supply chain disruptions are the main inflationary threats.

According to their thoughts,As the labour market remains tight, companies are raising wages to attract and retain employees and will need to pass on price increases to consumers.

According to a survey by NABE, most companies have raised prices, successfully passing on higher labor costs to consumers. About 45% of the companies surveyed said they had passed on some of the rising costs to consumers, and 15% said they had passed on all or most of the rising costs to consumers. Looking ahead, about half of the respondents expect their companies to raise prices in the next three months, while the vast majority of the rest are expected to maintain current prices.

With US inflation at a 40-year high, the Fed is trying to bring inflation down to its 2 per cent target, a trend that poses a challenge to the Fed.

In the years after the 2007-09 recession, wage growth was weak even as unemployment fell to an all-time low.The situation today is completely different. Although the unemployment rate has dropped to close to the pre-epidemic level, the turnover rate is far higher than the pre-epidemic level, and wages have also risen sharply.

The average worker's salary rose by an average of 6% in three months in march, according to wage tracking data from the federal reserve in Atlanta. It is up from 3.4 per cent a year ago and 3.7 per cent in February 2020 (before the outbreak in the US), when unemployment was at a 50-year low.

The reappearance of the "wage-inflation spiral" of the 1970s?

There was a wage-inflation spiral in the United States in the 1960s and 1970s. Does this widespread wage rise mean that this vicious circle is making a comeback?

A report by Societe Generale Securities earlier this month suggested that the current risk was still low.

One spiral channel from rising wages to rising inflation is that rising wages push up corporate costs and a backlog of corporate profits, and companies may often have to raise product prices in order to maintain profit margins.

This round still stays at the inventory cycle level.Although enterprises have begun to transmit rising labor costs to end customers, the increase of labor costs has not significantly exceeded labor productivity.

Residents' long-term inflation expectations are still significantly lower than in the 1970s, and as long as the Fed's persistent hawks do not let long-term expectations break down, the risk now looks manageable as a whole.

Looking ahead: wage increases are not over yet, but growth is likely to slow. The return of supply in the job market is a slow variable, and wage increases are not over yet. However, with the gradual return of the labor force with low bargaining power, the increase in overall wages is expected to slow later.