New figures show that the period of fast accelerating wage growth in the UK, US and Europe, as the labour market recovered from the 2020-2021 Covid pandemic, could be coming to an end.
Data from Indeed shows that year-on-year wage growth is 6.1% in the UK, 6.5% in the US, and 5.1% on average across the EU countries. However, the latest UK and US figures are below their early-2022 peaks of 6.4% and 9%, respectively.
The US figures were particularly significant, flagged Indeed, because at the current rate, posted wage growth in the US could return to its pre-pandemic rate of 3-4% by the second half of 2023.
These trends could lead to a moderation of worker wage demands in 2023, even as inflation remains high” – Pawel Adrjan, Indeed
In Europe, average wage growth in the six euro-area countries tracked by Indeed slowed for the first time in 19 months, from 5.2% in October to 5.1% in November. The slowdown was most apparent in Ireland, Italy and the Netherlands, while France, Germany and Spain were holding fairly steady.
Wage growth in Europe appeared to be peaking at a rate well below consumer price inflation. Instead, said Indeed, it was tracking core inflation, which excluded food and energy. In other words, wage increases appear to overlook fast-rising food and energy prices, perhaps because those shocks are perceived to be temporary.
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The new figures come from the second instalment of the Indeed wage tracker, released on 8 December 2022, which provides monthly insights into wage growth in job postings across seven European countries, and now the US.
Indeed data shows that lower-paid jobs have seen the biggest slowdown in wage growth in the US and the UK.
The picture was more mixed in EU countries, where pay gains were still accelerating in high-wage jobs. In contrast, in low-wage jobs, wage growth fell from 5.9% in October to 5.8% in November, while growth for middle-wage jobs fell from 5.1% to 4.8%.
Pawel Adrjan, director of economic research at Indeed, said: “Although neither our tracker nor the aggregate employment and unemployment figures suggest a significant labour market weakening in any of the countries we follow, posted wages may be significantly forward-looking. Their slowing growth hints the uncertain economic outlook could be starting to weigh on labour markets, consistent with the slight decline in job vacancy rates in Europe.
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“It is too early to say whether these small shifts represent a turning point for wage growth; however, they do point to the risk of wage-price spirals being limited. These trends could lead to a moderation of worker wage demands in 2023, even as inflation remains high.”
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