Wage growth may be slowing from 'breakneck' pace
The rapid pace of pay increases that characterized the labor market for much of last year may be starting to slow down.
Wage growth among private-sector jobs slowed to 1.2% in the fourth quarter of 2021 from 1.4% in the third quarter, according to U.S. Department of Labor data issued Friday.
That pace is still fast; it translates to a roughly 5% annual raise for workers, well above the pre-pandemic trend around 3%, according to Nick Bunker, economic research director for North America at the Indeed Hiring Lab.
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The deceleration suggests businesses are having any easier time finding workers — and therefore may not feel the need to bid up wages as rapidly to attract talent in 2022.
«The Q4 data hints at a slowdown,» Bunker said. «In combination with other data, it suggests the breakneck speed of wage growth we saw in summer and early fall may not be the pace we see moving forward.»
«Slowing down from 120 miles per hour to 90 miles per hour is slowing down,» he added. «But you're still hitting 90, which is pretty quick.»
A further slowdown could be unwelcome news for workers. Inflation has been running at its fastest pace in decades, eroding the large raises workers have gotten.
If wage growth continues to decelerate while the cost of living doesn't, the trend may eat into their paychecks even more. However, if inflation moderates in 2022 and wage growth plateaus at current levels, workers may ultimately experience a net raise, Bunker said.
Demand for workers surged last year as the U.S. economy emerged from its pandemic hibernation.
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