The US job market is booming, but the era of rapidly rising wages seems to be over: Hourly earnings rose by only a cent in February.
While the labor market continues to recover from the pandemic-induced recession—at a much faster pace than in previous recoveries—the impact of omicron and receding government support has reduced workers’ ability to bargain for higher wages. That’s stalled a steady climb in pay.
The slowdown in pay growth will alleviate economists fears that the US could enter into a wage-price spiral that would produce inflation that feeds on itself and rises exponentially, but it also means that workers who were hoping to take part in the bonuses that come with a hot labor market might not get them.
Why are wages not increasing?
Part of the slowdown is related to how economic data are calculated. Salaried workers worked less hours in January while they were out of work with omicron, which bumped up their hourly earnings artificially, said Skanda Armanath, director of Employ America, a labor-market research and advocacy group.
But even adjusted for those kinds of economic data technicalities, wage growth was negligible—only 0.04% in February according to Harvard economist Jason Furman.