Key Points:

  • US data is included for the first time in the latest edition of the Indeed Wage Tracker, a new indicator of pay growth based on wages and salaries posted in Indeed job ads.
  • The Wage Tracker shows US posted wages grew in November at a robust 6.5% year-over-year pace, up from 3.1% in November 2019.
  • Nevertheless, year-over-year posted wage growth has declined substantially in recent months, falling from a peak of 9% in March 2022, a signal employers now face less-steep competition for new hires.
  • The deceleration is broad-based, with wage growth in 82% of job sectors lower in November than six months earlier.
  • Wages and salaries advertised in job postings have been rising quickest in lower-wage occupational categories, but those sectors are now seeing the biggest declines in growth.
  • If posted wage growth continues on its current trajectory, it will return to its pre-pandemic range by the second half of next year, though it will take more time for the trend to appear in overall measures of wage growth.

After a year-and-a-half of rapid pay gains, wage growth registered in Indeed job ads has started to slow, according to new US data from the recently launched Indeed Wage Tracker. 

The tracker provides a new approach to monitoring wage growth trends. Most wage growth measures look at changes in wages and salaries actually paid to employed workers. Our tracker focuses instead on wages and salaries published in job postings on Indeed, thereby taking the temperature of the market for new hires. The wages of new employees are more responsive to changes in economic conditions, which means our measure may be a leading indicator of broad wage growth trends that will register months later. 

In November, posted wages grew a strong 6.5% year-over-year. But that seemingly impressive number represented a substantial deceleration from the peak of 9% growth recorded in March 2022. The drop has been broadly felt, with less than one-fifth of job categories seeing steady or increasing wage growth.

Declining growth in posted wages may help allay concerns that newly hired workers will be able to negotiate larger and larger pay gains, setting off a wage-price spiral. Chair Jerome Powell of the Federal Reserve recently spotlighted the importance of wage growth for the inflation outlook, saying that the labor market needs to cool substantially for inflation to drop. As Chair Powell and his fellow policymakers consider slowing the pace of interest rate hikes, the tracker offers an early signal that wages have started to cool. 

Growth in advertised pay is high, but slowing quickly

Wages and salaries advertised in Indeed US job postings started rapidly accelerating in early 2021 as the labor market started to recover from the COVID-19 pandemic. This acceleration started to lose steam this past spring as wage growth began to fall from its high point. On its current trajectory, posted wage growth would return to its 3-4% pre-pandemic pace by the second half of 2023.

Line graph titled “US wage growth is elevated, but trending down” with a vertical axis from 0% to 10%.
Line graph titled “US wage growth is elevated, but trending down” with a vertical axis from 0% to 10%. The graph covers from January 2019 to November 2022. It shows posted wage growth rising quickly through most of 2021 and 2022 before peaking in March 2022 and declining through November.

A slower pace of posted wage growth means pay of workers hired to fill open positions will rise more slowly, in turn reducing upward pressure on wages of employees staying at their current jobs. 

The Atlanta Federal Reserve produces its own Wage Growth Tracker data series measuring pay trends for workers who have switched jobs. The Indeed Wage Tracker seems to have led the Atlanta Fed job switcher series by about three months in capturing pay trends over the course of the pandemic. The Indeed Wage Tracker’s lead is due to lags in the Atlanta series that stem from the length of the hiring process and the time needed for data collection. For example, Indeed’s tracker finds posted wage gains peaked in March 2022, while the Atlanta Fed tracker shows wage gains for job switchers tipping over in July. 

Line graph titled “Posted wage growth has led job switcher wage growth” with a vertical axis from 0% to 10%.
Line graph titled “Posted wage growth has led job switcher wage growth” with a vertical axis from 0% to 10%. The graph covers from March 2019 to November 2022. It shows that posted wage growth started rising before wage growth for job switchers did in 2021 and started declining in 2022 before the other series did. 

The pullback in posted wage growth is broad-based and largest in lower-wage sectors

The slowdown in posted wage gains is not happening in just a few segments of the labor market. Pay grew more slowly in November than six months before in the vast majority of occupational categories. Only 18% of categories had posted wage growth that held steady or increased from May to November 2022. In contrast, 93% of categories had steady or strengthening gains from May 2021 to November 2021.

Line graph titled “Wage growth is falling in most categories” with a vertical axis from 0% to 100%.
Line graph titled “Wage growth is falling in most categories” with a vertical axis from 0% to 100%. The graph covers from September 2019 to November 2022. The share of categories with steady or rising wage growth rose in 2021 before dropping through most of 2022, hitting 18% in November.

Still, the level of wage growth varies significantly across groups. Growth of posted wages in the Childcare category dropped 4.5 percentage points since May, but was still up a strong 9.5% year-over-year in November. The rapid pace of wage growth in this category reflects the particularly hard time employers have had filling vacancies in this low-wage, in-person field. 

Gains are closer to the economy-wide average for Construction jobs and its wage growth deceleration has been relatively mild. Whether Construction pay holds up in the face of a weakening housing market is an open question. 

Posted wages and salaries in Marketing job ads are growing much more slowly than earlier this year. Marketing job postings have fallen considerably this year, which means employers may be finding it easier to hire.

A table titled “Posted wage growth by occupational category.”
A table titled  “Posted wage growth by occupational category.” The table shows categories sorted by their level of wage growth relative to wage growth in all job postings. The table also shows the percentage point change in wage growth in November compared to 6 months prior.

One thing the categories with the fastest posted wage gains have in common is they tended to advertise low wages before the pandemic. When we group jobs into low-, middle-, and high-wage tiers based on advertised pay in 2019, the acceleration and deceleration in posted wage growth during the pandemic have been most dramatic in the low-wage categories, which includes sectors such as Food Preparation & Service and Retail. Posted wage growth for the low-wage group peaked at 12.3% in January and has fallen by almost five percentage points through November.  

Line graph titled “Wage growth is fading fastest in low-wage categories” with a vertical axis from 2% to 12%.
Line graph titled “Wage growth is fading fastest in low-wage categories” with a vertical axis from 2% to 12%. The graph covers from Mar 2019 to November 2022. The graph shows a much quicker rise in wage growth in low-wage sectors and then a much steeper decline as well.

Looking ahead: How quickly will wages slow down?

Wages and salaries advertised in job postings on Indeed are a potential canary in the labor market coal mine. The slowing pay gains in job postings may be a harbinger of what broader measures of compensation will show in the months ahead. 

The Indeed Wage Tracker suggests wage growth for job switchers will continue to decline, but the time it will take for this to register in new employee wages is about three months. On its current trajectory, posted wage growth may return to its pre-pandemic pace late next year. Overall wage growth tends to trail gains for new hires. That means overall wage growth may not get back to pre-pandemic levels until well into 2024.  We are still in the early innings of this wage slowdown. The Indeed Wage Tracker is a valuable tool that can help policymakers, job seekers, and employers see the shape of things to come.

Methodology

To calculate the average rate of wage growth, we follow an approach similar to the Atlanta Fed US Wage Growth Tracker, but we track jobs, not individuals. We begin by calculating the median posted wage for a given country, month, job title, region and salary type (hourly, monthly or annual). Within each country, we then calculate year-on-year wage growth for each job title-region-salary type combination, generating a monthly distribution. Our monthly measure of wage growth for the country is the median of that distribution. Alternative methodologies, such as the regression-based approaches in Marinescu & Wolthoff (2020) and Haefke et al. (2013),produce similar trends.

More information about the data and methodology is available in a research paper by Pawel Adrjan and Reamonn Lydon, Wage growth in Europe: evidence from job ads, published in the Central Bank of Ireland’s Economic Letter series.

The wage tiers of occupational categories are determined by ranking categories by the median wage advertised in the sector in 2019. The categories are then split into three tiers so each tier contains categories that covered one-third of job postings on Indeed on an average day in 2019. The average posted wage growth for each tier is a weighted mean of each category in the tier in which the weight is the number of salary or wage observations in the category that month.