The Demand for Econ Professors

My Department chairman is mystified: You would think that with the crisis in public budgets, the demand for new economics faculty members would have shifted leftward. Similarly, with graduate students having delayed entry into the market, the supply of new Ph.D.s this year would have shifted rightward. Together, these changes should have lowered the price (wage) that the market pays new Ph.D.s.
But no — the wage at good schools for new economics faculty appears to be much higher than two years ago. Has the economics profession repealed the laws of supply and demand? My answer, of course, is no. Rather, with the prospect of little hiring and even shrinking faculty, economics departments have more incentive to stock up on the most promising young faculty to build their reputations. Competition for the very best students has increased, raising the wage at the upper tier of the market. Sadly, there is little substitution further down the quality scale: My students are not receiving higher pay than their recent predecessors. They are good students, but not at the very top tier of the new supply. Any other explanations? (HT: DS)