Average hourly earnings were up 4.1% in March compared to a year ago, according to the March jobs report. That’s faster than the latest rate of inflation, and good news for workers. But it’s also slightly less than the annual wage growth we saw in February. And that is a hopeful sign for the Fed as it keeps trying to tame inflation.

Wage increases peaked back in March 2022, at 5.9% a year. That was at the height of the crazy-tight post-lockdown labor market. Now, says Frank Fiorille at small-business payroll processor Paychex, “things are kind of coming off the boil, or slowing somewhat.”

Small businesses — which have less wiggle room on wages — have hiked pay just over 3% in the past year.

“Definitely coming down, the word we like to use: ‘in balance,’” said Fiorille.

One thing in particular that’s more “balanced,” says Fiorille: quitting. Fewer people are leaving one job for another, and landing a big raise in the process.

“Employees are definitely looking for some stability,” said Raj Namboothiry, the SVP for North America at staffing firm ManpowerGroup.

Employers are finding more stability, too, says Julia Pollak at ZipRecruiter. 

“They are experiencing an increase in the availability of labor and they’re finding it slightly easier to hire,” said Pollak.

While wage inflation has cooled over the past year, price inflation has cooled even more, Pollak points out.

“And so workers are coming out ahead. They’ve now experienced positive real wage growth since May of 2023,” said Pollak.

Though it still may not feel great, says Joanne Hsu, director of the University of Michigan consumer surveys. 

“People really celebrate when they get raises, right? And it doesn’t feel good when a raise you get from a promotion or from good performance gets eaten away,” said Hsu.

Hsu says we tend to credit our own efforts when we earn more, but blame outside forces — the economy, retail chains, politicians — when we have to spend more of what we earn, just to make ends meet.