Dive Brief:
- A gauge of wage growth has fallen to the lowest level since April 2021, the National Association for Business Economics said Monday, describing results of a quarterly survey.
- Just 41% of economists on a NABE panel reported an increase in wages during the past three months, NABE found in its Business Conditions Survey conducted this month. During the current quarter, 51% of the panelists expect no change to wages, while 48% anticipate an increase, the association said.
- “It appears from this survey as though wages are no longer the major concern regarding inflation,” ZipRecruiter Chief Economist Julia Pollak said Monday during a NABE webcast. “Wage growth will continue to slow but very, very gradually,” she predicted, noting a loosening in the labor market during the past several months.
Dive Insight:
The NABE findings align with those of recent studies that highlight slowing wage gains.
The proportion of small businesses that reported raising compensation fell to the lowest level since March 2021, the National Federation of Independent Business found in a December survey. The share of respondents that plan to raise employee pay in the next three months also declined compared with November, the federation said.
In addition, the proportion of CFOs planning to increase average compensation in the year ahead slumped to 61% this year from 71% in 2024 and 86% in 2023, Gartner found in a poll.
“The slowdown in pay increases reflects falling rates of inflation and lower levels of voluntary employee attrition,” Randeep Rathindran, vice president for research at Gartner, said in a statement Monday.
“Even though the labor market is cooling, CFOs must balance the potential risks of attrition and low engagement as employees still face stubbornly high costs for household necessities,” he said.
Pay has increased faster than inflation in recent years as U.S. employers, buffeted by the pandemic, adjusted to the tightest labor market in decades.
During the fourth quarter, median weekly earnings rose 4.1% compared with Q4 2023, outpacing the 2.7% gain in the consumer price index during the period, the Bureau of Labor Statistics reported Wednesday.
At the same time, demand for labor eased during 2024, with the unemployment rate rising to 4.1% in December from 3.7% in January.
“Very few employers cite labor shortages as their key concern, and where they do cite labor shortages, it's for specific, specialized, high-skilled roles where they can raise wages and improve offers for individuals,” Pollak said.
“These are not shortages seen sort of en masse, the way we saw during the pandemic,” she said. “So for the majority of positions, employers do not feel tremendous wage growth pressure going forward, and that's a key reason to expect to see further easing in wage growth.”
The top risk, cited by 61% of NABE panelists, is lack of clarity over the timing and implementation of Trump administration policies, NABE found. Recession — and the potential restraint to growth from restrictive monetary policy — has faded as the darkest cloud for the business outlook.
The focus of economists has shifted “from one storm to another,” Pollak said.
In prior surveys “the major source of uncertainty was what will [Federal Reserve Chair] Jerome Powell do,” she said. “Now it’s what Donald Trump will do.”
NABE surveyed 70 economists between Dec. 30, 2024 and Jan. 13, 2025.
