Wage growth is the focus of everyone’s attention.
After a year of record increases to keep up with inflation and to recruit and retain workers in one of the tightest labour markets in history, the Federal Reserve is hoping that employers will slow wage growth.
If this occurs, the central bank may be able to slow the pace and magnitude of its rate hikes aimed at lowering inflation. This could even prevent a recession. Early indications of slower wage growth can be found in job postings and government data. But it’s probably too soon for the Fed to celebrate.
Wage increases through 2022
The average hourly wage increased by $0.09 to $32.82 last month. This represents a 53% decrease in the rate of wage growth since December 2021, when average hourly earnings increased by $0.19. Average hourly wages are up 4.6% year on year, which is one-tenth of a percentage point less than the annual rate at the end of 2021.
According to the Atlanta Fed’s Wage Growth Tracker, wages for part-time and full-time workers were 6.2% higher in November than in 2021.
Data from the job board Indeed paints a similar picture.
Wages for jobs posted on Indeed increased by 6.3% year on year in December. This is 3% faster than the wage growth rate in 2019. However, December’s Indeed data marks the ninth consecutive month of wage growth declines from March, when wages were on track to grow by 9% year on year.
Overall wage growth is slowing in 80% of the industries tracked by Indeed. According to a post by Nick Bunker, director of economic research at Indeed, the lowest wage growth is occurring in low-wage sectors such as childcare and food preparation.
What does this all mean for 2023?
Bunker isn’t betting, stating that “the outlook for 2023 is still unclear.”