By Howard Schneider
WASHINGTON, March 6 (Reuters) – At the height of the pandemic’s labor shortage, convenience store chain Sprint Mart struggled to staff its southern U.S. stores as workers available headed for the higher wages that Amazon.com Inc offers in its fulfillment centers. or opted for flex jobs in the gig economy.
It took two years, sequential pay raises totaling 20-30% and new self-scheduling software, but Sprint Mart human resources manager Chris McKinney said the Mississippi-based company let go. behind it the problems, with a stable workforce of around 1,400 people. and enough pending applications to justify the turnover.
“We started gaining ground six or nine months ago, getting back to where we thought we should be,” after numbers fell to 1,100, he said. “We are taking applications, and at this time we are not pursuing an endless increase in hourly wages.”
In the Federal Reserve’s quest to contain inflation and find a stopping point for interest rate hikes, few dynamics will be as important as those of Sprint Mart in attracting workers to service-type jobs. first order most affected by the pandemic.
Fed policymakers, including Chairman Jerome Powell, have pointed to wage and hiring trends in the broader service sector as critical to their inflation outlook and therefore to monetary policy.
Although there is disagreement on the extent to which wage increases directly influence price increases, Powell in particular said that the recent rate of wage growth – between 4.4% and more than 6% per year by two common measures – is inconsistent with Fed inflation. mandate.
This target is defined as a 2% annual increase in the personal consumption expenditure price index, which in January was increasing at an annual rate of 5.4%. This week, Powell will present his semiannual report to Congress on monetary policy and the economy to the Senate Banking Committee on Tuesday and to the House Financial Services Committee on Wednesday.
If the Sprint Mart experience is any indication, the tide may be slowly improving in the Fed’s favor as companies gradually complete adjustments to wages, benefits and working conditions needed to stay competitive in the economy. post-pandemic and, as McKinney put it, “they let off the accelerator.”
Companies “want to have more workers rather than fewer. That’s a general proposition,” Atlanta Fed President Raphael Bostic told reporters last week. However, they “also hope to slow the pace of wage increases and eventually normalize it… We’re hearing a lot of consensus that this is still in recovery mode and will subside.”
PROVISIONAL SIGNALS
Although the overall labor market remains tight, with millions more workers than are available, Atlanta Fed Vice President and Chief Economist Jon Willis said the Recent data and surveys show good reason to believe that wage growth will continue to slow.
Following pandemic-era adjustments, companies “are very conscious that they don’t want to take salaries too far away from long-term plans,” he said. Data such as the recent increase in the number of people turning to part-time work suggests that companies are turning to flexible hours and other incentives to attract employees, but not higher wages.
Like Willis, private economists and staffing and payroll analysts also see a stressed but adjusting labor market.
A recent study by Goldman Sachs concluded that wage growth should continue to slow even with the current low unemployment rate of 3.4%. According to Manuel Abecasis, economist at Goldman Sachs, once the pandemic-related changes are completed, companies will not have to continually increase incentives for workers beyond the new baseline.
Between lower inflation, a slow but steady decline in job vacancies and the end of pandemic adjustments, wage growth is expected to decline by the end of next year at an annual rate of 3.5% , deemed more in line with the Federal Reserve’s inflation targets.
The minutes of the Fed’s meeting held between January 31 and February 1 seemed to agree that there were “tentative signs” that hiring was slowing and labor costs were growing. work was slowing down.
The 517,000 new jobs created in January raised fears that the economy is still too hot. But even that was accompanied by a slowdown in wage growth, and that increase was amplified by the seasonal adjustments used to account for expected fluctuations in hiring during the holidays.
It appears that companies have hired more staff than usual during the holidays, which could reduce seasonal hiring in the future and bring the labor market closer to equilibrium.
(Reporting by Howard Schneider; Editing in Spanish by Manuel Farías)