Wage gains for American workers have continued to fall from the highs reached during the post-pandemic reopening.
And that’s just as true for people who keep the same job as it is for those who find a new gig.
Annual wage increases for workers who stayed in the same job rose at the slowest pace in nearly three years in June, according to new data from ADP released Wednesday. For job switchers, annual wage growth fell for the third month in a row.
“We’re in a different regime than we’ve been in the past, where job growth was either flat or even rising,” ADP chief economist Nela Richardson said on a call with reporters Wednesday.
“The question before us is how low it is [it] will take? The idea that job growth would return to pre-pandemic levels is still being challenged.”
In June, wages for those staying on the job rose 4.9% from a year earlier, slower than the 5% pace seen last month and the slowest increase since August 2021. Wages for workers who changed jobs rose 7.7% year-on-year, down from 7.8% a month ago and well below the 16.4% seen at its peak in June 2022.
Read more: How does the labor market affect inflation?
Richardson noted that the still high wage gains for job switchers reflect that there is still a tightening in the labor market among other signs of a slowdown, a trend among a number of recent labor market data.
New data from the Bureau of Labor Statistics released Tuesday, for example, showed there were 8.14 million job openings at the end of May, up from 7.92 million jobs in April.
Overall, labor market data have largely shown continued signs of moving off the boil, but not entering a rapid cooling. Richardson reasoned that a similar trend is emerging in the ADP data. The ADP Research Institute’s National Employment Report showed 150,000 private sector jobs were added in June, a slowdown from May’s 157,00 job additions.
Richardson noted that a range of about 120,000 to 150,000 monthly job additions keeps the labor market in a sweet spot, where warning signs of a slowdown in the U.S. economy are not flashing, but neither is the economy overheating.
And for Richardson, the real concern would be a sudden drop in job gains.
“It’s the rate at which the economy evolves, not necessarily the level,” Richardson said.
“And if we see the cooling go from gradual to steep, I think that’s a warning bell.”
With the jobless rate at its highest level in more than two years and jobless claims continuing to rise each week, economists remain cautious about the trajectory of the labor market.
On Wednesday, data from the Labor Department showed that about 1.86 million ongoing jobless claims were filed in the week ending June 29, up from 1.83 million a week earlier.
“While layoffs remain low for now, we think the increase in claims reflects more workers applying for benefits as they find it harder to find work as the pace of hiring has slowed,” Oxford Economics’ lead U.S. economist wrote. Nancy Vanden Houten. note to customers on Wednesday. “Despite the recent increase, initial claims remain below the level we think would signal a significant slowdown in job growth.”
Vanden Houten added, “Current labor market conditions allow the Federal Reserve to be patient before cutting interest rates, although recent favorable inflation data gives them leeway to respond to any unexpected weakening in Labor market.”
Friday will bring the next big labor market update with the closely watched wages 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 the unemployment rate holding steady at 4%, according to data from Bloomberg.
Josh Schafer is a reporter for Yahoo Finance. Follow him to X @_joshschafer.
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