Advisor Flipbooks

2024 SEI ® Data as of 12/31/2023 unless otherwise indicated. 5 Other countries are experiencing easing labor market conditions as well. Exhibit 6 compares job openings to the number of officially unemployed persons. In the U.S., that amounts to 5.8 million persons. Currently, there are 1.3 job vacancies per unemployed person in the U.S. Except for Japan, that is a higher ratio than in the other countries listed in the chart, but it is down from a high of two job vacancies per person reached in March 2022. Japan has recorded a more modest decline, but the labor market in that country was even tighter in the years just prior to COVID. Canada and the U.K. also have recorded significant declines in their ratios since mid-2022. Exhibit 6: Fewer jobs to choose from Source: FactSet, SEI. Given this backdrop of easier labor-market conditions, it is not surprising that the Organisation for Economic Co-operation and Development (OECD) reported a sharp deceleration of compensation gains in the U.S. over the four quarters ending in September 2023. But the data are noisy on a year-to-year basis, and we think it is proper to take a multi-year average to discern the real trend in the international compensation statistics. Exhibit 7 examines total compensation rates (wages and non-wage benefits) for the U.S., the U.K., Canada, Germany, France and Japan, annualized over a three-year period. Exhibit 7: Wage pressures trend down in the U.S. and Canada, but are rising elsewhere Source: Organisation for Economic Co-operation and Development, SEI. Both the U.S. and Canada have recorded a marked slowing in compensation gains from their 2022 peaks, although the advances in both countries are still running at their highest annualized levels since before the Global Financial Crisis of 2007-to-2009. The other four countries in the chart are still registering an accelerating rate of gain, led by the U.K. (+5.6% through the third quarter) and France (+4.3%). Even Japan has seen compensation rates break out to new multi-decade highs; although the pace of gain remains much lower (1.3%) compared to those of the other major countries. We believe that demographics will limit the deceleration in compensation gains over the course of the next business cycle. The retirement from the labor force of the baby boomer generation (those born between 1946 and 1964) accelerated during COVID, causing a 1.6-percentage point reduction in the labor force participation rate for that group. The participation for persons 55 years of age and over has stabilized in recent years around 39%, but it will surely start to decline again as more workers reach full 0.00 0.50 1.00 1.50 2.00 2.50 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Ratio Job vacancies per unemployed person Japan U.S. Canada U.K. Germany -4 -2 0 2 4 6 8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Percentage change over 3-year span, annualized Compensation rates, total economy in local-currency terms U.K. France U.S. Canada Germany Japan

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