American workers are seeking hefty pay bumps as employers struggle to fill a record number of openings.
Job seekers now expect to make 34% more than their current salary for a new job, according to a May 3 report from Glassdoor, a U.S. jobs site. That averages out to $9,253 per year more, roughly double what job seekers were looking for just two years ago.
The study was released the same day that the Bureau of Labor Statistics reported U.S. job openings jumped to a record 11.5 million, or roughly 1.9 job openings for every unemployed American.
This historic imbalance in the labor market has compelled workers to seek relatively steep pay increases and forced employers to meet their demands or keep millions of openings unfilled.
"Workers currently have the upper hand and are not letting their foot off the gas," said Richard Johnson, an associate economist at Glassdoor. "As job seekers continue to push for more competitive compensation packages and benefits, it's unlikely that this trend will subside when the job market cools off."
Hiring woes
Wages for U.S. workers increased by 5.5% from April 2021 to April 2022, according to the latest government data. While annual wage growth cooled slightly from March, which saw a 5.6% increase, pay remains elevated, growing by an average of 5.4% this year.
Pay is expected to increase as companies continue to struggle to fill openings. Nearly half of small-business owners were unable to fill open positions in April, according to a May 10 survey from the National Federation of Independent Business. The survey found that 93% of owners looking to hire had few or no qualified applicants for those open positions.
"Despite a more cautious outlook for the economy, firms are still looking to hire additional staff," said James Knightley, chief international economist at ING, in an interview. "This excess demand for workers means wages will likely continue to [rise]."
Demand for workers is unlikely to fall in the near term as the the labor participation rate — the number of workers in the population in the job market – fell to 62.2% in April from 62.4% in March. It was the first time the participation rate declined from the previous month since January 2021.
The participation rate decline in April reversed a strong uptrend in previous months, said Michael Pugliese, an economist at Wells Fargo Securities. More Americans are likely to reenter the workforce as concerns about COVID-19 and childcare obstacles are lessened, and household finances decline as inflation rises.
"There remain significantly more tailwinds to labor force participation than headwinds," Pugliese said.
Show them the money
Pay increases have not been uniform across the labor market, as turnover in restaurants, schools and healthcare facilities has been particularly severe during the pandemic.
Salary expectations for jobs in education, food service and entertainment were significantly higher than in other industries, according to Glassdoor.
"Employers are competing fiercely for workers in consumer-facing roles where salary expectations are the highest," said Johnson with Glassdoor. "Industries like restaurants, bars and food services and retail were hit hard by the pandemic, but increased savings and loosened COVID-19 restrictions boosted consumer spending, leading to a higher demand for workers in these industries."
Wages in the leisure and hospitality sector have cooled slightly from their surge late last year, but in April remained 11% higher than they were a year earlier, according to the latest government data.
Outside of that sector, however, most wage increases have failed to keep pace with inflation. Both wage growth and inflation are nearing their peaks, said Oren Klachkin, lead U.S. economist at Oxford Economics.
"Annual wage growth has likely peaked, but wages will continue to make inroads relative to prices," Klachkin said. "We see the gap in growth between wages and prices narrowing in the months ahead."