The Hiring Outlook in the Fed’s Eighth District for 2023

How are employers dealing with the labor market? What are the key issues they’re facing, and what do they expect for the year ahead?

Every December, the St. Louis Fed asks regional contacts a set of special questions on hiring plans as part of its quarterly survey. The most recent responses provide useful insight as to how firms across the Eighth Federal Reserve DistrictHeadquartered in St. Louis, the Eighth District includes Arkansas, southern Illinois, southern Indiana, western Kentucky, northern Mississippi, eastern Missouri and western Tennessee. are dealing with an uncertain economic environment.

Wage Increases Slow but Remain Widespread

In the December survey, a majority of firms said they were raising wages for most job categories by more than in past years to attract new hires, while almost half said they were raising wages more than in past years to retain workers. (See the figure below.)

Seventy percent of all surveyed firms said they were increasing starting wages or salaries for new hires in most job categories. Not shown in the figure, an additional 14% said they were raising starting wages for only selected job categories.

Firms were less likely to raise wages to retain existing employees: 47% of firms reported raising wages for most job categories by more than usual. About 16% reported raising wages for only selected job categories.

Firms Increasing Wages/Salaries for Most Job Categories by More Than in Past Years

SOURCE: Federal Reserve Bank of St. Louis.

While still high by historical standards, this represents a year-over-year decrease in the share of firms raising wages by more than usual. In December 2021, 76% of firms reported raising wages for new hires across most job categories, and 60% reported raising wages for existing employees across most job categories. Both figures were the highest reported since the St. Louis Fed started surveying employers on their hiring plans in 2015; prior to 2021, the share of employers reporting raising wages for both sets of employees had never been higher than 40%.

Survey Indicates Slower Job Growth but No Decline Expected

Thirty-two percent of firms surveyed reported plans to increase employment over the next 12 months, while 55% reported that they planned to leave employment levels unchanged. This was the lowest share of firms expecting an increase in employment levels since 2014; in 2021, 64% of firms reported plans to increase employment.

Of the firms that reported plans to increase employment, the top factors cited were “overworked staff” and “expected growth of sales is high.” While expected sales growth has long been a key factor cited by firms that plan to increase employment levels, the share of firms reporting overworked staff was well above historical norms (72% in December 2022 versus an average of 59% from 2015-2020), which speaks to the pressures placed on workers by strong demand and low staffing levels.

Notes

1. Headquartered in St. Louis, the Eighth District includes Arkansas, southern Illinois, southern Indiana, western Kentucky, northern Mississippi, eastern Missouri and western Tennessee.