US Wage Growth Slows to a Three-Year Low in June as Labor Market Shifts


Pay for American workers has continued to decline from the highs reached during the post-pandemic reopening, affecting both job stayers and job changers.

Slowing Wage Growth for Job Stayers and Changers

According to new data from ADP released Wednesday, annual wage increases for workers who remained in their same job in June grew at the slowest rate in nearly three years. For those who changed jobs, wage increases have declined for the third consecutive month. “We are in a different regime than we’ve been in the past where that job-stayer growth was either flat or even rising,” said ADP chief economist Nela Richardson during a call with reporters. “The question before us is just how low is [it] going to get? The idea that job stayer growth would go back to pre-pandemic levels is still being challenged.”

In June, wages for job stayers rose 4.9% from the previous year, slower than the 5% pace seen in the prior month and the slowest growth since August 2021. Wages for workers who changed jobs increased 7.7% year over year, down from 7.8% the month prior and significantly below the 16.4% peak in June 2022.

Labor Market Remains Tight Despite Signs of Slowing

Richardson noted that the still-elevated pay gains for job switchers reflect a lingering tightness in the labor market, despite other signs of slowing. New data from the Bureau of Labor Statistics released Tuesday showed there were 8.14 million job openings at the end of May, an increase from 7.92 million in April. Overall, labor market data indicates continued signs of cooling but not a rapid slowdown.

The ADP Research Institute’s National Employment Report showed that 150,000 jobs were added to the private sector in June, a slight decrease from the 157,000 jobs added in May. Richardson suggested that a range of 120,000 to 150,000 monthly job additions keeps the labor market balanced, avoiding warning signs of a slowdown while not overheating the economy. “It’s the rate at which the economy evolves, not necessarily the level,” Richardson said. “And if we see the cooldown go from gradual to steep, I think that’s a warning bell.”

Unemployment and Jobless Claims Rising

The unemployment rate is currently at its highest level in more than two years, and continuing unemployment benefit claims are increasing each week. On Wednesday, data from the Department of Labor showed nearly 1.86 million continuing unemployment claims were filed in the week ending June 29, up from 1.83 million the previous week. “While layoffs for now remain low, we think the rise in claims reflects more workers applying for benefits because they are finding it more difficult to find jobs as the pace of hiring has slowed,” wrote Nancy Vanden Houten, lead US economist at Oxford Economics, in a note to clients.

Vanden Houten added that current labor market conditions allow the Federal Reserve to be patient before lowering interest rates, although recent favorable inflation data provide them with latitude to respond to any unexpected weakening in the labor market.

Upcoming Labor Market Data

Friday will bring the next major labor market update with the closely followed nonfarm payroll report from the Bureau of Labor Statistics. The report is expected to show that 190,000 nonfarm payroll jobs were added to the US economy in June, with unemployment holding steady at 4%, according to Bloomberg data.