Wage growth is still outpacing inflation, but that could soon change if tariffs begin to meaningfully boost prices.
Key Takeaways:
- Wages and salaries in the private sector slowed from an annual increase of 3.7% in December to 3.4% in March, according to the Bureau of Labor Statistics’ Employment Cost Index.
- Compensation costs in March increased 4.6 percent year-over-year for union workers and 3.3 percent for non-union workers.
Growth in employers’ compensation costs slowed slightly in the first quarter, according to the Bureau of Labor Statistics’ Employment Cost Index, continuing a trend of backwards-looking government data releases that paint a potentially misleading picture of past stability that may not match current volatility. While wage growth continued to outpace inflation to start the year, concerns are mounting that rising prices driven by the implementation of sweeping new tariffs could quickly begin to outpace wage growth, undermining the modest real income gains workers have made over the past year. If inflation does begin to pick up again, the ability for wage growth to quickly adjust to keep up will be paramount in helping keep consumer spending – the backbone of the US economy – strong.
Wages and salaries in the private sector slowed from an annual increase of 3.7% in December to 3.4% in March, in line with other measures of salary growth, including the Indeed wage tracker, which showed year-over-year wage growth at 3% in March, down from 3.2% in February. While the overall trend doesn’t yet signal immediate danger, it comes at a time when inflation risks are resurfacing. The risks of slowing wage growth may be especially acute for unionized workers, who have enjoyed substantial raises as a result of several high-profile negotiations in recent years, but may now be subject to slower, more prescribed raises going forward. For now, the slowdown in compensation isn’t troublesome—but with inflationary pressures looming, that balance may prove difficult to maintain.
