According to the Bureau of Labor Statistics latest report, wage inflation now exceeds 5.7%, outpacing consumer inflation which came in at 4.0% year-over-year. This marks a positive shift for workers who experienced real wage declines during the post-pandemic inflation spike.
Andrew Crapuchettes, CEO of RedBalloon, noted that the US ongoing historic worker shortage is the key driver behind wage inflation. "We’re in an historic worker shortage as our economy continues to adjust to the decline in population growth,” said Crapuchettes. “That means competition for employees will continue driving wage inflation at its own pace, regardless of other factors. It’s the basics of supply and demand, and the tight labor market isn’t going to ease up anytime soon.”
With job openings outnumbering available workers nearly two to one, the ongoing wage inflation reflects the demand for skilled employees. This trend is expected to persist as the labor market remains tight and competition for talent continues to drive wage growth.
According to the U.S. Bureau of Labor Statistics, median weekly earnings for the nation's 121.5 million full-time wage and salary workers reached $1,100 in the second quarter of 2023 (not seasonally adjusted). This represents a 5.7 percent increase compared to the previous year, outpacing the 4.0 percent gain in the Consumer Price Index for All Urban Consumers (CPI-U) during the same period.
The recent surge in wage inflation surpassing consumer and wholesale inflation signals a positive trend for workers in the face of a historic worker shortage. The dynamics of supply and demand in the labor market are driving this shift, with competition for employees fueling wage growth. While workers experience a welcome increase in their earning potential, employers must adapt to the evolving labor landscape and strive to remain competitive in attracting and retaining top talent.