Although wage growth has cooled since 2022’s highs, it remained above inflation and held stable in June, according to a July 24 report from Indeed’s Hiring Lab.
Based on federal data, 57% of workers’ pay grew faster than inflation, up from a low of 44% during the peak of inflation. In particular, certain higher-paying occupations — such as electrical engineering, legal services and marketing — had higher wage growth.
“The rapid pace of wage growth that marked much of the early post-pandemic period, generating headlines and fears of a wage-price spiral that would keep pushing inflation higher, is definitely in the rearview,” Cory Stahle, an economist at the Indeed Hiring Lab, wrote in the report.
“Comparable wage growth measures have also slowed but generally remain higher than the pace of inflation, giving workers a boost in real income,” Stahle wrote. “But the latest data show that not every American is experiencing the same boost in purchasing power, and many may not be seeing any boost at all — a worrisome turn amid fears of an impending tariff-driven rekindling of inflation.”
Annual wage growth peaked at 9.4% in January 2022 and fell steadily through spring 2024 before stabilizing at rates similar to those seen pre-pandemic, Stahle wrote. During the first half of 2025, wage growth slowed again, reaching 2.9% year-over-year in June. With the annual inflation rate at 2.7% in June, the gap is at the narrowest point in 12 months, he noted.
Depending on the industry, HR teams may need to consider this gap to remain competitive in talent acquisition and retention. Typically, wages should outgrow inflation to match the rising costs of living, Stahle wrote, though both grew rapidly in 2021-2022 and eroded consumer purchasing power.
So far, raises are falling short of employers’ projections for 2025, driven in part by a softening labor market, according to a Mercer report. With an ongoing decline in annual compensation budgets and moderation in base pay increases, wage growth may be returning to pre-pandemic norms, Mercer found.
