Macro

Labor Markets are Not as Healthy as They Look!

In recent weeks, labor markets have appeared to stabilize as the number of new job postings has increased. But while postings have grown, the salaries associated with those postings have fallen dramatically.

Revelio Labs

8/19/20

In recent weeks, labor markets have appeared to stabilize as the number of new job postings has increased. But while postings have grown, the salaries associated with those postings have fallen dramatically.

By tracking expected salaries from 9 million job listings since March, and controlling for changes in seniority, occupation, and city, we found that salaries have fallen by 8.8%:

Below are the changes to salaries by city:

And below are the changes to salaries by job type:

Takeaways:

  • Overall demand for labor continues to fall dramatically amid high unemployment. This has manifested itself, not through fewer employment opportunities, but through lower wages. This effect is entirely consistent with economic theory and gets missed by conflating demand with quantity demanded.
  • While the public sector has received significant support these last few months, the private sector has received less, which may explain why cities like New York and Philadelphia are more impacted than cities like Washington DC.
  • We believe that there is significant and unrealized risk of wage deflation in the near future. While interest rates are currently fairly low, we see evidence that monetary policy is insufficiently accommodating in the current environment.

If you have any ideas of other metrics to track or would like to hear more, please feel free to reach out to us.

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