Average hourly wages grew 3.9% over the last year, according to the June jobs report. That’s the slowest pace of wage growth in two years — and it’s another sign the labor market is cooling.  

Lower income earners are gonna feel that more than others. At the same time, 3.9% is still a decent number.

A key metric the Fed has been following is wage growth, which can be a driver of price inflation. Americans’ average hourly earnings were growing at nearly 6% per year in 2022, but that torrid pace has since slowed down. 

One reason: More workers are staying put in their jobs.

“One of the best ways that people see real wage increases is by quitting a job and getting another one,” said Elise Gould at the Economic Policy Institute. She added that as the quits rate came down, so did wage growth.

Another change? Weekly jobless claims have been trending up, said Bill Adams at Comerica Bank.

“More people are losing their jobs and staying unemployed for longer,” Adams said. “When workers are laid off, they’re more likely to end up in a job where they didn’t make as much.”

Gould pointed out that even as wage increases slow, price increases are slowing more — and it’s helping keep consumer spending up.

“What people care about is their purchasing power,” Gould said. “Real wages have been rising for the last 13 months. That is fantastic.”