:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-2087331178-ed041769dc484f1e84c42dd9a4cce3fc.jpg)
Key Takeaways
- The average American’s weekly pay rose at the same rate as prices in December, according to employment data released Friday and economists’ inflation forecasts.
- At the industry level, wages grew slower than prices rose for the average worker in half of the industries followed by the Bureau of Labor Statistics.
- The labor market has cooled this year, but some Fed officials have suggested wage growth may need to slow more to bring inflation down to the central bank’s 2% goal.
The average American worker’s pay increased at about the same rate as inflation in December, but pop the hood, and you’ll find some workers fared better than others.
The average non-farm worker’s weekly pay increased by 0.28% in December, about in line with November’s inflation rate of 0.3%. Economists surveyed by Bloomberg Finance expect inflation data scheduled to be published next week to show prices rose at the same rate in December.
However, raises differed dramatically across industries last month. Weekly pay rose by more than 1% in two industries: transportation and warehousing (1.16%), in which 6.6 million people were employed in December, and utilities (1.13%), which employed nearly 600,000 people.
On the other hand, average weekly pay declined 0.18% for the 6.2 million people in the wholesale trade industry. The mining and logging industry also saw wages decline, as did the professional and business services industry, which employs nearly 23 million people.
Even several industries where wages rose last month—including construction and the information sector—failed to keep pace with inflation, meaning real earnings decreased.
Wage growth has kept up with inflation for more workers on an annual basis. Wage growth has fallen short of November’s 2.7% annual inflation rate in just three sectors—“other services” (+2.61%), transportation and warehousing (+1.39%), and mining and logging (+0.2).
Excluding supervisors, managers, and executives, month-over-month wage changes lagged price increases in more than half of the sectors tracked by the Department of Labor. The average wage for nonsupervisory utilities workers declined more than 0.3% in December, suggesting the sector-wide wage growth seen in the table above can be attributed entirely to managerial pay. On the flip side, the average non-managerial mining and logging worker’s pay increased by more than 1%; including managers, wages declined by 0.1%.
Wage growth has proved surprisingly resilient in recent years. Despite higher prices, Americans’ paychecks go further today than they did before the pandemic, which has helped the economy continue to grow despite the Federal Reserve’s rate hiking cycle.
While the rate of wage growth has slowed throughout the year, the labor market remains unexpectedly strong. The U.S. added far more jobs than expected in December, a revelation that has raised doubts about when the Fed will cut interest rates again. According to the Fed’s most recent meeting minutes, some officials suspect that wage growth will need to slow even more to bring inflation down to their 2% target.
