Average Hourly Earnings, All Employees Versus Composition- Adjusted Measure
Data this week showed U.S. job growth averaged a solid 111,000 per month over the three months ending in June, nudging the unemployment rate down to 4.2%. With the labor market stabilized and core inflation still sticky, policymakers are on the lookout for a wage growth reacceleration that would let businesses pass higher prices on to consumers. On the surface, there’s cause for concern: average hourly earnings ticked up to 3.5% year-over-year in June from 3.4% in May. Is wage growth accelerating? Probably not. Monthly noise may be at work—leisure and hospitality employment sank in June, tilting the composition toward higher-paying jobs—and a composition-adjusted measure, which fixes industry weights to 2019 to strip out volatility from employment shifts, is still cooling. That said, wage growth remains above its pre-pandemic average, and a few sectors—leisure & hospitality, healthcare & education, and manufacturing—are driving most of the cooling. As we celebrate the 250th anniversary of independence, fireworks celebrating wage growth normalization will have to wait.
