Yahoo Finance Wage growth hits 2-year low as 'big post-pandemic pay increases seem to be behind us'
The US labor market continues to show signs of tightening, with new wage data out Wednesday revealing that big pandemic-era pay bumps are evaporating both for workers staying in their current roles and those finding new jobs.
ADP's monthly private payroll data released Wednesday showed annual wage growth for workers changing jobs fell to 8.4% in October, the slowest pace of growth since July 2021. Meanwhile, workers who kept the same job saw wages rise 5.7% last month, the least since September 2021.
"No single industry dominated hiring this month, and big post-pandemic pay increases seem to be behind us," ADP chief economist Nela Richardson said in the release.
"In all, October's numbers paint a well-rounded jobs picture. And while the labor market has slowed, it's still enough to support strong consumer spending."
ADP's report showed private employers added 113,000 new jobs last month, fewer than the 150,000 Wall Street economists had expected.
Other jobs data out Wednesday flashed similar signs about the labor market.
The latest Job Openings and Labor Turnover Survey, or JOLTS report, revealed that the quits rate in September remained unchanged at 2.3% for the third consecutive month. Quits are closely watched by economists, as elevated quits are seen as a sign of confidence among workers.
They can also can be seen as a leading indicator for future wage growth, according to SoFi head of investment strategy Liz Young. Young wrote in a post on X that historically, the quits rate has led the Atlanta Fed's wage tracker by about nine months, meaning Wednesday's JOLTS data "suggests further wage growth deceleration," a positive development for the Fed's inflation fight.
Importantly, though, not all wage data points are flashing the same signals. On Tuesday, data from the Bureau of Labor Statistics showed the latest Employment Cost Index rose 1.1% in the third quarter, slightly faster than 1% gain experienced in the second quarter.
On annual basis, however, wages grew 4.3%, below the 4.5% seen in the second quarter and 5% seen in the first quarter.
"A surprisingly strong 1.1% [quarter-over-quarter] increase in the employment cost index in Q3 released [Tuesday] is an important reminder that the trend of slowing wage growth will not necessarily continue when the labor market is still tighter than normal by many measures other than the quits rate," Citi economist Veronica Clark wrote in a research note on Wednesday.
The September JOLTS report also showed signs the labor market remains in search of the "better balance" between supply and demand the Federal Reserve has been working toward.
Wednesday's report showed there were 9.55 million jobs open at the end of September, a slight increase from the 9.5 million job openings in August. Economists surveyed by Bloomberg had expected there were 9.4 million openings in September.
Meanwhile, hires were little changed at 5.9 million. In sum, the numbers show job openings that have moved significantly off their pandemic highs but are still above average.
"We don't expect further Fed rate hikes, but the risks continue to be tilted in that direction," Oxford Economics lead US economist Nancy Vanden Houten wrote in a research note on Wednesday. The Fed needs to see more evidence of slower job and wage growth to be convinced that inflation is on a sustainable path back to 2%.
The Federal Reserve is expected to announce its latest policy decision at 2 p.m. ET on Wednesday. It is widely expected the central bank will hold rates steady.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
Another update on the labor market and wages will come on Friday, when the October jobs report is slated for release at 8:30 a.m. ET.
Josh Schafer is a reporter for Yahoo Finance.
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