Credit Sesame discusses how consumers may benefit from continued job growth.
Prices are rising, debt is growing, and consumers are feeling the squeeze. However, they have one compelling thing on their side–a strong job market.
The latest employment report from the Bureau of Labor Statistics (BLS) showed the job market continuing an impressive winning streak. Despite higher interest rates and an economy that has flirted with recession, job growth has continued to surprise on the upside.
This is good news for everyone. A strong job market can benefit workers in general and not only people looking for a job. It represents an opportunity to grow your income. An increased income may be your best shot at getting ahead of inflation and paying down some of your debt.
History suggests that this is likely to be a limited-time-only opportunity. So it may be worth taking action now if you want to take advantage of it.
Job growth continues to defy expectations
According to the latest Employment Situation report from the BLS, the U.S. economy added 339,000 jobs in May.
Despite continued forecasts from economists saying that job growth will slow, May’s figure was the best since January. It was within a couple thousand of the average for the past twelve months. The report even included a combined 93,000 in upward revisions to March and April’s job growth estimates.
In short, there are no signs that the job market is losing momentum. It’s now riding a winning streak of 29 straight months of employment growth. Not only has the job market been growing consistently, but the change has been robust. Each of those 29 months of job growth has seen employment grow by over 200,000 jobs. Based on BLS employment figures going back to 1939, that’s something that’s never happened before.
Just how strong is the job market?
Of course, some growth during the job market’s winning streak represents recovery from the severe job losses during pandemic shutdowns. However, employment has gone beyond the pandemic recovery phase to set new all-time highs.
There are now over 3.7 million more jobs than at the pre-pandemic peak. To look at it another way, more people are working in this country than ever before.
There are many more jobs than there are people to fill them. BLS figures show roughly ten job openings for every six people looking for work. That suggests that workers should have the upper hand over employers in today’s job market.
How does job growth help with debt and inflation?
While the job market has been a bright spot for the economy, debt and inflation remain problems. How do they relate to each other?
A strong job market should represent a good earning opportunity for workers. They can use the high demand for labor to seek better opportunities or get more pay for their current work.
Income growth is key to dealing with higher prices and larger debt loads. For one thing, once prices rise, they don’t typically fall back down again. Inflation may slow, but prices are rising less quickly than before. It doesn’t usually involve prices reverting to their former levels. So, wages need to catch up with the new price levels.
The difficulty of making ends meet when prices rise suddenly and drastically can be seen in the record amount of debt people have taken on. Total household debt recently crossed $17 trillion for the first time. In just the past five years, American consumers have taken on $3.83 trillion in additional debt.
Continually taking on debt is not sustainable. At some point, households must stop spending less than they’re bringing in and start paying down some of what they’ve borrowed.
While reining in spending would help, increasing income is the most powerful tool for getting on top of household finances. Fortunately, the strong labor market often sets up conditions where that should be possible.
Many workers are missing an opportunity
Here’s an example of how favorable the job market is for workers. A recently-released Federal Reserve study found that 70% of employees who asked for a raise last year got one.
The problem is too few workers are taking full advantage of the strong job market. While most people who asked for a raise got one, the Fed study also found that only 13% of American adults asked for a raise or a promotion last year.
In many cases, not being assertive enough may give inflation the upper hand. A Credit Sesame survey found that fewer than one in five Americans got a pay raise within the past year that came even close to keeping up with the inflation rate.
Employees would be wise not to wait too long before getting more assertive about seeking higher pay. Prices and debt are up sharply, so incomes need to catch up. Also, today’s employment conditions are unusually strong. That won’t last forever. If a recession hits, which many economists feel is a distinct possibility in the months ahead, new jobs will become harder to find, and employers will likely become stingier with pay raises.
The right way to ask for a raise
The best way to approach asking for a raise is to be businesslike about it. Try to frame the discussion as a win-win, where what benefits you also helps the organization.
Here are some tips:
- Research your marketability. Before you meet with your boss to discuss a raise, look at the job market. See what kinds of offers are out there with someone with your qualifications and experience. Your employer is competing in the same job market, so they probably know what it would take to attract a replacement. This will give you a solid target to shoot for when you ask for a raise. As a fallback, if you don’t get what you want from your current employer, this research will give you a feel for your chances of finding a better opportunity somewhere else.
- Document your achievements. Don’t expect something for nothing. Go into the discussion with a list of your accomplishments over the past year and information on how you’ve added value to the organization.
- Don’t give an ultimatum. No good manager is going to tolerate being pushed into a corner. Be constructive. Approach the conversation as one where you show your employer why they should want to give you a raise, not as one where you try to make them feel they have to give you a raise.
- Ask about your career track and what’s required to advance. Get specifics about what potential there is for you to grow within the organization and what you need to do to get future opportunities. Make your boss think of you as someone who is serious about playing a growing role in the years ahead. Also, if there isn’t much of a future there, you can start to turn your attention to outside opportunities.
Don’t tune out economic news as a bunch of academic statistics that have nothing to do with you. Developments in the economy often have a direct impact on your household finances. That’s especially true when those developments involve the job market.
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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.