Average pay raise hits 5.5% - with those who switched jobs getting 7.7% raise

The average American worker saw record-high pay increases in 2022, regardless of whether they stuck with their current position or switched companies and jobs. 

New data shows those who stayed in their job saw a 5.5 percent increase in pay in November 2022 compared to November 2021. 

The Federal Reserve Bank of Atlanta also said employees who switched companies saw gains of 7.7 percent compared to a year prior.

While the growth means more money in the pockets of American workers, the raises are also pushing inflation higher, according to experts. 

New data shows those who stayed in their job saw a 5.5 percent increase in pay in November 2022 compared to November 2021

 The Federal Reserve Bank of Atlanta also said employees who switched companies saw gains of 7.7 percent compared to a year prior

The wage increase for those who stayed at their jobs was up from 3.2 percent in January 2022, a 1.8 percent increase overall. 

Job switchers had an increase of 3.4 percent from November 2021 to November 2022. 

Experts say the possibility of earning a higher income at a different company is what is driving companies to increase wages for their current employees. 

Layla O'Kane, an economist who spoke with the Wall Street Journal, said easy job applications and bountiful job openings are enticing employees to switch, however. 

'If I can see that the Burger King down the street is offering $22 an hour, and I'm making $20 an hour at the Dunkin' Donuts that I work at, then I know very clearly what my opportunity cost is,' O'Kane said. 

'Employers are reacting to that and saying, 'Well, we're going to increase wages internally because we don't want to lose the staff that we've already trained.' 

Not all employees saw an increase, though.  

Wages for employees in the private-sector declined by 1.9 percent in November 2022, after inflation was accounted for.

Layla O'Kane, an economist who spoke with the Wall Street Journal, said easy job applications and bountiful job openings are enticing employees to switch

'If I can see that the Burger King down the street is offering $22 an hour, and I'm making $20 an hour at the Dunkin' Donuts that I work at, then I know very clearly what my opportunity cost is,' O'Kane said

The wage growth is contributing to inflation, however. 

While inflation came down slightly in the later months of 2022, the U.S. saw record-high rates earlier in the year. 

In November, inflation in the US came in at 7.1 percent.

The number, still high, marked the fifth-straight month of shrinking annual increases.

Wages for employees in the private-sector declined by 1.9 percent in November 2022, after inflation was accounted for

The latest wage data comes as two-thirds of economists at the largest US financial institutions believe a recession will occur in 2023

The latest wage data comes as two-thirds of economists at the largest US financial institutions believe a recession will occur in 2023, according to a new survey.

The Wall Street Journal survey of 23 primary dealers, the large financial firms that do business directly with the Federal Reserve, found a majority expect a recession in the coming year.

Among the top economic concerns cited included dwindling personal savings, the decline in the housing market, and tightening lending standards at many banks.

It follows the Fed's rapid rate hikes to battle soaring inflation last year, which saw the benchmark rate rise from near zero in March to a range of 4.25 percent to 4.5 percent by the end of the year.

A majority of economists at the largest banks, including Bank of America, Barclays and UBS, are predicting a recession in 2023 amid rising warning signs

Rising prices have forced consumers to rapidly spend down savings, which soared during the COVID-19 pandemic

The Fed rapidly raised interest rates in 2022 to fight inflation, increasing recession risks

The central bank forecasts that will reach a range of 5 percent to 5.25 percent by the end of 2023. Its forecast doesn't call for a rate cut before 2024. 

The Fed policy rate is now at its highest level since prior to the 2008 recession, as the central bank attempts to bring inflation down without triggering an economic downturn. 

By the Fed's preferred measure, inflation is still running nearly three times its 2 percent goal, having risen earlier in 2022 at its fastest pace in 40 years. 

Rising prices have forced consumers to rapidly spend down savings, which soared during the COVID-19 pandemic thanks to stimulus measures and a slowdown in spending.

The consumer price index rose at the fastest rate in 40 years earlier in 2022