After reaching a pandemic-induced peak three years ago, wage growth in the U.S. has markedly slowed.
Last month, wages for new job postings grew about 2.9% year over year, with a similar rate seen in May. That compares to the peak of 9.4% growth reached in January 2022. That’s all according to the latest job posting data compiled by Indeed Hiring Lab.
Cory Stahle, senior economist with Indeed Hiring Lab, said in an interview with CFO.com that the numbers are simply a reflection of basic supply and demand in the labor market. The relative peak reached three years ago came at a time of mass worker shortages as many individuals left the labor market entirely or switched jobs in the wake of COVID-19. Demand for workers has evidently tapered off since then.
“Wages often represent the demand for workers,” Stahle said. “We’re seeing that weaker hiring demand show up in wage growth numbers.”
Indeed’s research shows the rapid wage growth of a few years ago “is definitively in the rearview,” Stahle wrote in the report.
Wage growth is not, of course, tapering off at the same level for all professions. Indeed researchers noted wage growth for electrical engineers ticked up 6.3% year over year in June, and 5.1% for both legal and marketing roles. Wage growth for banking and finance roles inched up 3.8%, Stahle said.
“We’ve seen that finance in general was following a lot of the other trends and patterns seen in other white-collar roles, where it was declining for a bit and then started to stabilize in 2024,” he explained. “But now we’ve started seeing a little of a resurgence in demand as measured by job postings for finance roles, so it’s not too surprising we’re also seeing wage growth picking up a little more strongly for those roles.”
Indeed’s research also shows wage growth, for now, continues to outpace inflation, which increased at a rate of 2.7% last month, according to the consumer price index.
It’s worth noting that Indeed calculates wage growth by tracking advertised pay found in job postings on its site. That differs from wage growth measured by the Federal Reserve Bank and the Bureau of Labor Statistics, which generally study the metric by tracking wages for currently employed people. But those entities also found a decline in wage growth in June.
The Federal Reserve Bank of Atlanta, for instance, reported wage growth of 4.2% last month, down from a relative high of 6.7% in early 2022, yet still not as dramatic a drop-off as seen in Indeed’s data.
Taken together, Indeed’s research and Fed data point to a changing dynamic for workers: No longer can people expect to raise their earnings significantly by switching jobs.
“There was usually a premium for changing jobs,” Stahle said. “But what we’ve seen is that over the last year or so, the pay increase rate between those who are switching jobs and those who are staying in jobs has narrowed to the point where they’re basically equal.”
The wage research may also show, perhaps counterintuitively, that now is a fortuitous time to hire. “Right now, a lot of people are hesitant to hire, but that also means there are a lot of opportunities if you’re looking to build out your team,” Stahle said. “Now can be a good time to hire because wage growth is a little more muted. There might be opportunities to pick up workers who might have been really hard to get a few years ago.”
