Now is the Time to Ask for a Raise

​America’s economy is reverberating with the effects of the pandemic, and unemployment rates, inflation, unfilled jobs, and the gross domestic product (GDP) are all playing an ugly game of spin the bottle.  How this shakes out is yet unknown, but what is known is that inflation is now a factor in everyone’s life, and it is time to consider that in evaluating one’s employment situation and terms.  Thankfully the economy appears to be robust, except for inflation, and there are more jobs than there are people looking for them. So this is an excellent time to ask for a raise or look for a better job.

Help Wanted Signs Have Become Common Again

Total unfilled jobs in the United States rose to about 9.6 million from values of about 7.6 million and about 6.8 million in the previous quarters, respectively.   Tightness in the labor market has increased wages as hourly earnings for production, and non-supervisory workers increased 5.5 percent over the year through September 2021.

Total nonfarm payroll employment rose by 531,000 in October, and the unemployment rate edged down by 0.2 percentage points to 4.6 percent in October 2021. Job growth was widespread, with notable job gains in leisure and hospitality, professional and business services, manufacturing, and transportation and warehousing. On the other hand, employment in public education declined.
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Demographic facts about the October report:

• The unemployment rate for adult men (4.3 percent) declined in October.
• The jobless rates for adult women (4.4 percent), teenagers (11.9 percent), Caucasian Americans (4.0 percent), African Americans (7.9 percent), Asians (4.2 percent), and Hispanics (5.9 percent) showed little or no change over the month, reflecting historical disparities in employment rates.
• The labor force participation rate was unchanged at 61.6 percent in October and has remained within a narrow range of 61.4 percent to 61.7 percent since June 2020.
• The labor force participation rate was 1.7 percentage points lower than in February 2020.
• The number of persons not in the labor force who currently want a job was 6.0 million in October, up by 968,000 compared to February 2020.
• The number of unemployed persons, at 7.4 million, continued to trend down.
• Among the unemployed, the number of permanent job losers, at 2.1 million, changed little in October but is 828,000 higher than in February 2020.

The all-items index rose 6.2 percent for the 12 months ending October, the most significant 12-month increase since the period ending November 1990. The index for all items except for food and energy rose 4.6 percent over the last 12 months, the largest 12-month increase since the period ending August 1991. The energy index rose 30.0 percent in the previous 12 months, and the food index increased 5.3 percent.  In other words, the cost increases are not simply due to cyclical energy cost increases, and as a result, the actual cost of living is increasing and take-home wages, absent upward adjustment, buy less.  Forgoing a raise means reducing the standard of living, and essentially, working for less.

Real GDP rose 2.0 percent at an annual rate in the third quarter of 2021, following robust gains of 6.3 percent and 6.7 percent in the first and second quarters, respectively.  The pace of GDP growth is better than the average 2.2 percent quarterly rate seen in the five quarters before the onset of the pandemic in the first quarter of 2020. Projections put real GDP growth at the end of 2021 at 5.5 percent, and at the end of 2022, at 3.5 percent.

Annual Wage Increase Rates by Year Through 2020

​The number of quits, or when people choose to leave their jobs, increased in September 2021, the most recent date with available data, to a series high of 4.4 million (+164,000). Quits increased in several industries with the largest increases in arts, entertainment, and recreation (+56,000); other services (+47,000); and state and local government education (+30,000). The separations across the board indicate people are leaving to move to less-miserable assignments or simply for higher wages.

Wage Increase Rates by Quarter Since the Pandemic Started

​As expected, unemployment rates above age 25 in the most recent data correlate with education:

• Only 2.4% of college graduates are unemployed.
• About 4.5% of those with associate's degrees are unemployed.
• High school graduates have a 6.8% unemployment rate.
• People who have less education than a high school degree have the highest unemployment at 7.8%.

Unfilled Jobs Have Reached an Incredible High

There are about 7.4 million unemployed people in the United States, and about 9.6 million job openings, indicating a competitive job market with rising wages. 
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Several conclusions become clear from this amalgamation of data:

• Barring some reversal in public health, such as a more virulent, vaccine-resistant COVID strain or an unexpected pandemic, the United States economy appears to be stable with historical growth in GDP.
• Inflation has substantially eroded the buying power of real wages and is offsetting wage increases.
• The inflation picture remains unclear, but regardless, a recession of energy prices will not shake inflation from the economy.
• There is considerable competition for labor, and that will inevitably increase salaries and benefits.