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.
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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.
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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.
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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.