Wage Growth Slows But Remains Solidly Above Pre-Pandemic Levels

Average hourly earnings grew 3.8% year-over-year in April, down from the 5.9% peak reached in early 2022 but still significantly above the 2.5-3.0% annual growth that characterized the pre-pandemic decade. For workers, this represents a meaningful improvement in real purchasing power, particularly as inflation has cooled toward the Fed's 2% target.

The persistence of above-normal wage growth reflects structural changes in the labor market that are unlikely to fully reverse. Baby Boomer retirements continue to remove experienced workers, reducing labor supply. The pandemic accelerated quit rates in low-wage sectors as workers discovered leverage they didn't previously know they had. And increasing automation in some sectors has paradoxically raised wages for workers whose skills complement rather than compete with technology.

Sector Variations

Wage growth is far from uniform across sectors. Healthcare workers are seeing 5-7% annual increases as the shortage of nurses and specialized practitioners intensifies. Technology workers, after a period of wage correction in 2023, are seeing renewed competition as AI demand requires skilled human oversight. Retail and food service, which saw the largest gains during the pandemic period, are now growing at a more moderate 3-4% pace.