Americans saw their paychecks increase at the slowest annual rate since May 2021, according to the latest data. In July, US workers earned an average of $35.07 per hour, marking a modest 0.2% increase from the previous month. This uptick in wages falls short of the robust monthly growth rates observed in recent years.
Compared to a year ago, average hourly earnings were up by 3.6% in July, representing the weakest annual rate since May 2021. The Employment Cost Index, a comprehensive measure of labor costs for employers, also indicated a similar trend during the period from April to June.
The ongoing decline in wage growth underscores a broader slowdown in the American job market. This trend is evident across various indicators such as monthly job gains, unemployment rates, and wage increases. Following the rapid recovery from the Covid-19 pandemic, which saw employers raising wages to attract workers amid hiring challenges, the current data suggests a cooling off in the labor market.
As a result of this deceleration in wage growth, there is reduced upward pressure on prices, contributing to a moderation in inflationary trends. This development is likely to influence the Federal Reserve's decision-making process, potentially leading to a cut in interest rates in September.
Despite the recent slowdown, annual wage growth remains stronger than pre-pandemic levels, offering some resilience in the face of economic uncertainties. However, the overall trajectory of wage increases and its implications for the broader economy will continue to be closely monitored in the coming months.
