US wage growth continues to slow as inflation comes down, offering encouraging news for the Federal Reserve as its chiefs meet at Jackson Hole, according to job-search website Indeed.
Wages posted in job ads on the site increased at an annual 4.7% rate last month, down from 5.8% in April and 8% in July 2022, according to Indeed’s latest Wage Tracker.
“Anyone concerned about a ‘wage-price’ spiral should be relieved” by the latest pay data, said Indeed economist Nick Bunker. “The risk of a resilient labor market keeping wage growth, and therefore inflation, elevated is diminishing.”
Fed Chair Jerome Powell, who’s due to address the Jackson Hole meeting on Friday, and some of his colleagues have expressed concern that pay gains could keep inflation above target and require more interest-rate hikes. US consumer prices are currently rising at a pace around 3%, according to headline measures. The Fed’s target is 2%.
The slowdown in Indeed’s wage measure aligns with a recent paper by Federal Reserve Bank of Cleveland researchers, which found that four-fifths of the increase in wage growth from the fourth quarter of 2020 through the first quarter of 2023 was due to inflation rather than any mismatch between the supply and demand of labor.
Another report by Gusto, a small business payroll provider, found that firms in July were offering new employees a wage that was 5.1% lower on average than hires for similar positions a year earlier. The study is based on data from some 300,000 companies that use the platform.
Indeed estimates that wages are likely to return to their pre-pandemic growth rate sometime between October and December if the current pace of deceleration continues.
For the Fed, that suggests that the job market is “an ally and not an adversary,” Bunker said.
This article was provided by Bloomberg News.