Recent data from the job site Indeed indicates a sharp slowdown in U.S. wage growth over the past year, with salaries up just 3.3% in February compared to a year prior. This is a significant drop from the 9.3% year-over-year wage growth seen in January 2022, suggesting employers are facing less competition for new hires.
Indeed labor economist Nick Bunker described the pace of deceleration as “striking,” noting that “posted wage growth has fallen by almost 3 percentage points over the past year.” The slowdown has been broad-based but most pronounced for low-wage workers, whose posted pay tumbled from 12.5% growth in early 2022 to just 3.4% in February.
“Given the huge run-up in posted wages for those sectors, wage growth is still above its pre-pandemic pace,” Bunker said. “How long this will last is uncertain.”
This is not good at all …
Inflation in many categories is running WAY faster that wage growth. pic.twitter.com/GhBM0kuWZM
— Wall Street Silver (@WallStreetSilv) March 17, 2024
High-wage and middle-wage workers have also seen their wage growth moderate substantially. The labor market has remained tight, but economists expect it to weaken further as the impact of higher interest rates spreads through the economy.
The Federal Reserve has raised rates 11 times since March 2022 to combat inflation, viewing fast wage growth driven by a strong labor market as a contributing factor. There are growing signs this is beginning to take effect, with notable layoffs at major companies like Alphabet, Amazon and Citigroup since the start of the year.
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However, the labor market has proven surprisingly resilient so far. Employers added 275,000 jobs in February, although the unemployment rate ticked up to 3.9%. This strong report reduced the chances of more aggressive rate cuts in the near future as the Fed continues its battle against stubborn inflation.
