Labor Market Cool Down Leads to Lower Wage Gains

Several Federal Reserve Bank surveys have reported that U.S. employers expect to hire less in 2024.  The Federal Reserve data shows that the government's efforts to slow growth and inflation filtered through into the economy.  It appears that the labor supply is coming back into better balance with demand.  The surveys indicate that wage expectations have now dropped to a three-year low, and are expected to slow to around 4% for 2024.  Aon predicts that businesses will average around 3.7% across all industries during 2024, with Mercer finding raises to drop to around 3.5%.

Regarding benefits, employer-sponsored health plans may resort again in 2024 to passing on many costs to their workers as medical inflation heats up.  Healthcare plan costs are forecast to rise over 7% during 2024, according to the Segal Group.  If employers don't make any changes to their plans during 2024, the average annual cost would be more than $15,000 per employee.  Mercer believes that healthcare costs will rise 5.4% in 2024 after health plans make changes to lower costs.  Some employers are experimenting with affordability for lower-wage workers by having a higher percentage of sharing for higher-wage workers.  

It also shows that Americans are quitting their jobs at a significantly lower pace beginning this past summer.  Quitting is considered to be a sign not only of unhappiness with the job, but also an indication that the employee believes he or she can find another position easily.  The quit rate went up to 2.3% in August, down from the 3% level in April of 2022.  The figures cause some to hope that the "great resignation" is over.  The current ratio of openings to unemployed people is 1 to 4, whereas at its peak in 2022 the ratio was 2 to 1.

This article is part of our February 2024 Newsletter. 

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