Increased Moderation in January 2025's Employment Cost Index: Strong and Durable

The latest data from the Indeed Wage Tracker suggests that the years-long slowdown in pay growth may be coming to an end. Today's data showed a slight uptick in quarterly wage growth for private-sector workers, indicating a potential normalization of the market.

According to the Indeed Wage Tracker, pay growth slowed in both quarterly and year-over-year measures. However, when workers with more volatile compensation are removed, the slowing trend in pay growth is not as apparent. This trend is particularly noticeable in the manufacturing and construction sectors.

The latest Employment Cost Index data did not suggest otherwise, and Federal Reserve Chair Jerome Powell recently reiterated his belief that the labor market is not a significant source of inflationary pressures. The Indeed Wage Tracker's data does not support the notion that employers feel less pressure to raise pay than they did a year or two ago.

In fact, the data shows that posted wage growth has been relatively stable in recent months. This stability suggests that the labor market may be balancing out further. The Indeed Wage Tracker indicates a potential normalization of the market, with pay growth showing signs of stabilizing.

Year-over-year wage growth for private-sector workers dropped to 3.6% in the fourth quarter, down from 4.3% at the same time a year ago. Despite this decrease, wage growth remains solid, and the data does not show a drop in year-over-year wage growth for private-sector workers as of the fourth quarter.

The Indeed Wage Tracker does not show a significant source of inflationary pressures from wage growth. This is good news for consumers, as it suggests that inflationary pressures may remain under control in the near future.

In conclusion, the latest data from the Indeed Wage Tracker suggests that the labor market may be balancing out, with pay growth showing signs of stabilizing. While wage growth has slowed in recent months, it remains solid, and employers do not appear to feel less pressure to raise pay than they did a year or two ago. The data does not indicate a continued slowdown in pay growth, and inflationary pressures from wage growth do not appear to be a significant concern at this time.

Increased Moderation in January 2025's Employment Cost Index: Strong and Durable