Economics: Why has US wage growth slowed?

The slowdown US wage growth looks genuine

It might not be immediately obvious in some statistics, but US wage growth has slowed since the end of last year. Even after adjusting for compositional effects, average hourly earnings are growing at around 4% – a rate broadly consistent with inflation of 2%.


A bullwhip effect in the labour market?

This probably reflects a combination of factors. Nominal growth has slowed a bit, the supply of labour has perhaps improved at the margin, and the demand for labour has also cooled off. This looks most clear in sectors that were previously most ‘hot’.


This ain’t the 1970s

With real wages and the labour share of income also both falling, this adds to evidence that there is no wage-price spiral developing. If the economy slows from here, as seems likely, wage growth should continue to come down, allowing inflation to decline.


Economics: Why has US wage growth slowed?