U.S. wage growth has slowed sharply over the past year and is on pace to return to pre-pandemic levels by early 2024, according to new data from career site Indeed.
The wage tracker – based on salaries for job advertisements listed on Indeed – showed that salaries were up 5.3% in May compared with the same time one year ago. That is a marked drop from January 2022, when wages were up about 9.3%, suggesting that employers are facing less competition for new hires.
Based on the current trajectory, wage growth will likely return to its pre-pandemic range of about 3% to 4% late this year or early in 2024.
MAJORITY OF WORKERS REGRET QUITTING DURING ‘GREAT RESIGNATION
While the deceleration is broad-based, it is most pronounced in low-wage sectors. Posted pay for that group tumbled to 5.6% in May from 12.5% at the start of 2022.
"Broadly speaking, it is clear that the largest slowdowns in wage growth are happening in typically lower-paying sectors," wrote Indeed labor economist Nick Bunker, "After growing much more quickly than wages in other segments over the past several years, wage growth for low-wage and middle-wage sectors was identical in May."
Among the industries that are seeing a rapid decline in wages is the software industry, which has been at the forefront of high-profile layoffs and hiring freezes. Job postings in that sector have plummeted by nearly 60% over the past year, and posted wage growth is currently less than half of what it was in November.
THE HOUSING RECESSION ISN'T OVER YET
Other sectors proved more resilient. Wage growth among construction jobs remains almost a percentage point above its 2019 average – a "notable" spike given the rapid rise in mortgage rates over the past year, which has led to less residential and commercial development.
The Indeed gauge underscores a separate report from the Labor Department released last week, which showed that average hourly earnings – a key measure of inflation – rose 0.3% in May, in line with analyst expectations. Wages are up 4.3% on an annual basis, the report showed.
The Federal Reserve is closely watching wage growth as it fights stubbornly high inflation with the most aggressive rate-hike campaign since the 1980s.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Policymakers approved a 10th straight rate increase in May, lifting the federal funds rate to a range of 5% to 5.25%, the highest since 2007.
Although the consumer price index has cooled from a peak of 9.1% in June 2022, it remains about three times higher than the pre-pandemic average despite the rapid increase in rates.
