The job market is cooling. For evidence, the Bureau of Labor Statistics recently released its August report, which found that the unemployment rate has risen from 3.5% to 3.8%. Additionally, new job losses (including people who completed temporary jobs) increased by 294,00 over July, and 597,000 people who have never worked before decided to enter the job market.
But there is another indication that the job market is cooling: Salaries are going down. ZipRecruiter analyzed salary by job title over the past year and found that the average posted pay by job title decreased more than it increased. Additionally, 48% of companies admitted to reducing pay for “certain roles.”
There are some problems with ZipRecruiter’s data in that laws regarding salary posting have also changed. Currently, eight states and six cities require pay transparency on job postings. The earliest of these was Maryland in 2020, with California, New York, Rhode Island, and Washington joining in 2023. New salary-disclosure requirements will change how you look at salaries on job boards.
So perhaps a better source of information about salary trends comes from Gusto, a payroll company. They found that new hires earned 5.1% less in July than last year. However, some jobs are still rapidly rising, led by tourism at 7%, warehousing at 6.9%, and construction at 6.4%.
Of course, Gusto does payroll for small to mid-sized businesses, and their information isn’t exactly a random sample.
Which Salaries Are Dropping?
To know for sure how salaries today compare to previous times, we have to wait for reports to come out across all sectors. Looking at job postings doesn’t give a clear view because it doesn’t tell us what compensation people ultimately accept.
However, Walmart announced they were cutting pay for pharmacists — not by cutting their hourly rate but by slashing their hours. So, an hourly job posting may not indicate any cut in wages, but in terms of real dollars, these pharmacists will be earning less.
In addition, with the tech layoffs earlier this year, some tech workers found themselves with the option of taking pay cuts or having no pay. But in tech-heavy Seattle, tech workers salaries dropped in 2022, as well. This perhaps indicates that these changes aren’t limited to the recent past.
What Are Recruiters Seeing?
It’s not that salaries are dropping across the board; there are problems with compression.
“I don’t think employers are agreeing to the crazy salary requests they were a year or so ago during the Great Resignation,” Beth Buckley, senior director of People at Bottle Rocket, posted on LinkedIn. “The problem is we now have even more compression issues. As others have said, though, realized wages are lower due to inflation.”
Deborah Brown-Volkman, chief career Officer at Surpass Your Dreams, sees a different issue: A true skills divide. She points out on LinkedIn: “I am seeing [salaries] going up for those who have the skills employers want. ‘I’m just like everyone else’ salaries are going down. Employers can get those people cheaper.”
In other words, salaries are probably safe for employees who have a unique and sought-after skill set. But candidates who can’t differentiate themselves within the market will find their wages slipping.
Irma Croteau, vice president of HR at Hisco, says that it’s not the companies that are changing. She writes: “From looking at ‘desired salaries’ when applicants voluntarily provide that information, the desires have gone down considerably from a year ago. We’re not changing our ranges, but now we are attracting more applicants with the same ranges than we were before.”
With more applicants, employers can, of course, pay less. When an applicant knows that there are 10 other qualified people, they will be less likely to attempt a salary negotiation.
All of these experts see things slightly differently but note that change is happening. Add to that inflation, and even if salaries don’t decrease, people’s buying power is lower, adding additional struggles for employees and candidates.
Overall, it appears to be an employer’s market in many positions, with more candidates available than have been in years past. However, a 3.8% unemployment rate is not high, so you shouldn’t expect to see salaries dropping rapidly.
Perhaps, as Jay Consoli, divisional analyst at the Boston Beer Company, writes: “Salaries aren’t dropping, but they’re not keeping up with how fast expenses are rising.”