Mid-Year Labor Market Summary

July 22, 2024
By: The Workplace Advisors

Half of 2024 is gone already. Time flies! The economy continues its solid growth, inflation is lessening, and unemployment remains low. There’s lots going on from a legislative perspective, too.

Here’s what you need to know:

New Jobs

Number of Jobs Added by Sector for First Half of 2024

Source: U.S. Department of Labor/Bureau of Labor Statistics

• Job growth during the first half of 2024 surpassed that of the second half of 2023. An average of 255,000 jobs have been added each month during 2024, compared to 213,000 during the second half of 2023.
• In June, 27,000 construction jobs were added, along with 19,000 manufacturing jobs and 24,000 professional services jobs

Wage Growth

12-Month Percent Change, Not Seasonally Adjusted, Civilian Workers

Source: U.S. Department of Labor/Bureau of Labor Statistics

• The chart above tracks increases in costs of wages and benefits from March 2018 to March 2024.
• Although wage growth has slowed in the first quarter of 2024, it is anticipated that growth for the full year will remain close to 4%.
• Benefit cost increases closely track those of wages.
• Wage growth projections from major compensation research organizations typically are not available until fall, but early estimates suggest wage growth of an additional 4% in 2025.

Unemployment

• The unemployment rate for June 2024 was 4.1%, compared to 4% in May. This compares to a recent low 3.4% unemployment rate in April 2023 and a recent high unemployment rate of 14.8% in April 2020.
• The U.S. Department of Labor considers an unemployment rate of 4% or less to be “full employment.” That generally signals recruiting challenges for employers as the number of positions exceeds the number of available candidates.
• Many economists interpret this uptick in the unemployment rate as a sign that the job market is “cooling” and that might send a signal to the Federal Reserve that it’s time to cut interest rates.

Legislative Updates

• Effective July 1, extensive changes to salary thresholds for “white collar” and highly compensated employee overtime exemptions took effect. The U.S. Department of Labor estimates that as many as 4 million workers could be impacted by these changes, including some of your employees. Read more about it here.
• In April, the Federal Trade Commission (FTC) issued a new ruling that bans enforceability for the vast majority of workers covered by noncompete agreements. The commission determined that such agreements negatively impact competitive conditions in labor markets, inhibit new business formation and lead to higher prices for consumers. Read about it on the FTC website. 
• Following the hottest year on record, the Occupational Safety and Health Administration is expected to announce a ruling designed to protect more than 50 million workers exposed to high heat conditions where they work. The ruling would apply not only to farm and construction workers but also to those who sort packages in warehouses and cook in commercial kitchens. Although not finalized, the ruling is expected to require additional breaks, access to water and shade, and air conditioning. More to come on this as we brace for another hot summer

Hot Topics

Base pay increases are expected to remain at about 4% through 2025. A recent Payscale survey asked participants how base pay increases were determined. A large majority responded that merit/performance continues to be the primary driver, but 57% reported market pressure as another important consideration and 40% cited internal pay equity as a determiner.

Variable compensation continues to be a supplement to base pay in many organizations. A recent survey conducted by the Academy to Innovate Human Resources reports that 77% of U.S. businesses currently have some type of variable pay program (they come in all shapes and sizes), and another 9% are expected to add this type of program in 2024.

Pay transparency is defined by World at Work as “the degree to which employers are open about what, why, how and how much employees are compensated. There are legal pay transparency requirements in several states, but more companies are becoming increasingly open about their compensation policies and practices to improve recruitment and retention. You can read more about it here.

Third Quarter Comp To-Dos

1. Collect market information for your positions, with a special focus on those that present recruitment and/or retention challenges.
2. Plan market adjustments based on results. 
3. Review current compensation programs, policies and procedures for needed changes and revisions.
4. Identify communication and/or training needs.
5. Begin salary planning for the annual increase process.
6. Begin salary planning for bonus and incentive payouts.