Bank of America Institute Senior Economist David Tinsley joins Yahoo Finance Live to discuss the state of the U.S. labor market, April JOLTS report data, job growth, and the outlook for pay raises.
BRAD SMITH: JOLTS numbers out, showing openings at 11.4 million and then the quits at 4.4 million. The new data adds to feelings of a white hot labor market, according to a Bank of America report reviewing customer bank data. Joining us for more is David Tinsley, who is the Bank of America Institute senior economist. And help us dive further into this data, particularly just describing the white hot nature of the US labor market and what type of data you were able to lean into to conclude this.
DAVID TINSLEY: Yeah, well, thanks for having me on. So what we've done is we've looked at our customers-- anonymized data set of our customi-- customers' payments into their accounts. And we've looked at the annual pay rise that they've been getting in the year to April. That comes in at roughly 9.2%, which of course is above the rate of inflation. And so there's real pay growth across the customers-- the customer base there.
BRIAN SOZZI: David, clearly the job market is slowing down. We'll probably see that as well on-- in the Friday jobs report. So you have called it white hot now. What's the next term you think you're going to call it?
DAVID TINSLEY: [CHUCKLES] That's a good question. But probably hot, to be honest. When we look at our-- in our data and we look at the change in the level of job changes, it has tick-- it has ticked down a little bit, and there are other indicators out there that show that the level of postings may have cooled off a little bit. But just like the jobs data today, you're really talking about a small, small drop back from still really stellar levels. So I think "hot" would summarize it pretty well.
BRAD SMITH: Are there specific kind of sectors, job types, role types that have benefited the most?
DAVID TINSLEY: Yeah, that's a good question. So I think what's happening at the moment is that you've got this rotation back into the service sector and also, into, in a sense, functions that support that service sector. And you've seen some of the jobs growth continuing apace really in those areas, but also in things like transportation, of course, as well, because we all know with the shortages, you know, truckers, et cetera, are very high demand. So it's not in any one sector. It's quite well percolated across the economy. But at the moment, it is beginning to seep back more into the service sector, I'd say.
BRIAN SOZZI: David, low income households have been hammered, hammered by inflation. What are you seeing from a wage perspective amongst that cohort?
DAVID TINSLEY: Well, that's quite interesting. So what we are seeing is the lower income end of the income distribution, at least in our data, the pay rise we're seeing-- and this is a pay rise after taxes, I should say, because that's what you observe when you look at the account details. That's about 12%. It's a little bit above average, which is good news, of course.
And for job changers, particularly the young, the pay rises are-- you know, call it almost a multiple of facts. So if you're a millennial and you're changing jobs, so by nature you would tend to be less well paid at the start, of course, as well, you might get a 20% rise. So you may have got a 20% rise. So that part of the high turnover end of the labor market really is delivering, or has been to date, delivering big pay rises.
BRAD SMITH: You know, as some corporations are bringing employees back to the office, of course, those negation-- negotiations, rather-- in wage are really kind of to offset some of their expenses, given the inflationary environment that consumers are facing at this point in time. And so how do you imagine that, if we do move off of a white hot labor market, that those negotiations may go forward between employers and employees?
DAVID TINSLEY: Yeah, that's a very good question. I mean, I think, as the labor market cools-- and, of course, it will cool from here somewhat. I mean, that's the very point of the Fed putting up rates is to cool the economy and the labor market somewhat-- then you would expect-- you would expect that wage growth to come down.
But by the same token, we've probably, I think, reached roughly the peak in inflation, hopefully. And so that should come down, too. So the exact playoff between those things is hard to exactly get right. But I think if the unemployment rate does start to soften up a bit, then I guess some of these pay demands may decelerate into the sort of back end of this year, in any case.
BRIAN SOZZI: David, I'm a very youthful and exuberant young millennial. What type of raise should I be asking my boss for, just so I keep pace with other millennials out there?
DAVID TINSLEY: Good question. So I think if you're staying in the Yahoo, you might want to-- you might get around about 11% rise. If you're feeling bold and changing jobs, you may get something closer to 20%. Of course, I think right now, by the nature of all this data, it's historic. And you know, right now, there is obviously a little bit more uncertainty about the economy.
So you do have to be a little bit more bolder to start looking right now. But by all accounts, the labor market is still very strong. And all the numbers out today, perhaps with the exception of that ISM manufacturing employment index-- all the other numbers out today underline the fact that the labor market's doing good nick.